Annual financial report, fiscal year 2003

ANNUAL FINANCIAL REPORT Board of Regents of
the University System of Georgia
For the Year Ended June 30, 2003
"Creating a More Educated Georgia"

ANNUAL FINANCIAL REPORT
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A Publication of the Office of Internal Audit 2003 Board of Regents of the University System of Georgia

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ANNUAL FINANCIAL REPORT UNIVERSITY SYSTEM OF GEORGIA
For the Year Ended June 30, 2003
INDEX Links

Consolidated Annual Financial Report 724k
Institution Annual Financial Reports
Georgia Institute of Technology ............................................................................................... Georgia State University........................................................................................................... Medical College of Georgia ...................................................................................................... University of Georgia ................................................................................................................. Georgia Southern University................................................................................................... Valdosta State University.......................................................................................................... Albany State University............................................................................................................. Armstrong Atlantic State University........................................................................................ Augusta State University........................................................................................................... Clayton College and State University..................................................................................... Columbus State University....................................................................................................... Fort Valley State University..................................................................................................... Georgia College and State University..................................................................................... Georgia Southwestern State University................................................................................. Kennesaw State University...................................................................................................... North Georgia College and State University......................................................................... Savannah State University....................................................................................................... Southern Polytechnic State University................................................................................... State University of West Georgia............................................................................................. Dalton State College.................................................................................................................. Macon State College.................................................................................................................. Abraham Baldwin Agricultural College................................................................................. Atlanta Metropolitan College.................................................................................................. Bainbridge College................................................................................................................... Coastal Georgia Community College................................................................................... Darton College......................................................................................................................... East Georgia College...............................................................................................................

596k 460k 600k 464k 452k 468k 428k 432k 448k 436k 436k 440k 460k 444k 444k 440k 444k 428k 448k 428k 436k 440k 412k 428k 436k 436k 440k

Floyd College............................................................................................................................ Gainesville College................................................................................................................. Georgia Perimeter College..................................................................................................... Gordon College......................................................................................................................... Middle Georgia College........................................................................................................... South Georgia College............................................................................................................ Waycross College..................................................................................................................... Skidaway Institute of Oceanography..................................................................................... University System Office.........................................................................................................

448k 408k 444k 440k 444k 432k 440k 404k 456k

ANNUAL FINANCIAL REPORT
Board of Regents of the University System of Georgia
For the Year Ended June 30, 2003
"Creating a More Educated Georgia"

Board of Regents of the University System of Georgia
Annual Financial Report June 30, 2003
Table of Contents
Members of the Board of Regents .................................................................................... 1 Letters of Transmittal ...................................................................................................... 2 Map of Institutions ........................................................................................................... 4 Institutions of the University System of Georgia ........................................................... 5 State Resources ............................................................................................................... 6
Management's Discussion And Analysis ..................................................................... 7
Financial Statements
Statement of Net Assets ....................................................................................................14 Statement of Revenues, Expenses and Changes in Net Assets ........................................15 Statement of Cash Flows ..................................................................................................16
Notes To The Financial Statements
Note 1 Summary of Significant Accounting Policies ..................................................18 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments........................24 Note 3 Accounts Receivable........................................................................................27 Note 4 Inventories........................................................................................................27 Note 5 Notes/Loans Receivable...................................................................................27 Note 6 Capital Assets...................................................................................................28 Note 7 Deferred Revenue.............................................................................................29 Note 8 Long Term Liabilities ......................................................................................29 Note 9 Lease Obligations.............................................................................................29 Note 10 Retirement Plans ..............................................................................................33 Note 11 Risk Management.............................................................................................34 Note 12 Contingencies...................................................................................................35 Note 13 Post Employment Benefits Other Than Pension Benefits................................35 Note 14 Natural Classifications with Functional Classifications ..................................37

BOARD OF REGENTS UNIVERSITY SYSTEM OF GEORGIA
June 30, 2003

Hilton H. Howell, Jr. .....................Atlanta State-At-Large Term Expires January 1, 2004
Hugh A. Carter, Jr. .......................Atlanta State-At-Large Term Expires January 1, 2009
Donald M. Leebern, Jr. ...................Atlanta State-At-Large Term Expires January 1, 2005
Joel O. Wooten, Jr. ...................Columbus State-At-Large Term Expires January 1, 2006
William H. Cleveland ....................Atlanta State-At-Large Term Expires January 1, 2009
W. Mansfield Jennings, Jr...........Hawkinsville First District Term Expires January 1, 2010
Julie Ewing Hunt ...........................Tifton Second District Term Expires January 1, 2004
Martin W. NeSmith. .....................Claxton Third District Term Expires January 1, 2006

Wanda Yancey Rodwell..............Atlanta Fourth District Term Expires January 1, 2005
Elridge W. McMillan ................Atlanta Fifth District Term Expires January 1, 2010
Michael J. Coles ...................Kennesaw Sixth District Term Expires January 1, 2008
Glenn S. White ................Lawrenceville Seventh District Term Expires January 1, 2005
Connie Cater ...........................Macon Eighth District Term Expires January 1, 2006
Patrick W. Pittard .....................Atlanta Ninth District Term Expires January 1, 2010
Allene H. Magill ......................Dalton Tenth District Term Expires January 1, 2008
Joe Frank Harris .................Cartersville Eleventh District Term Expires January 1, 2006
Timothy J. Shelnut ..................Augusta Twelfth District Term Expires January 1, 2007

OFFICERS OF THE BOARD OF REGENTS

Joe Frank Harris .........................Chairman Joel O. Wooten, Jr. ............... Vice Chairman Thomas C. Meredith ....................Chancellor

William R. Bowes ......................Treasurer Gail S. Weber ..........Secretary to the Board

Annual Financial Report FY2003 1

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA
270 Washington Street, S.W. Atlanta, Georgia 30334

Office of Internal Auditing

404-656-2237

January 15, 2004

Mr. William R. Bowes Vice Chancellor for Fiscal Affairs and Treasurer of the Board Board of Regents University System of Georgia
Dear Mr. Bowes:
I am submitting the Annual Financial Report of the University System of Georgia for the fiscal year ended June 30, 2003.
This submission represents the fifty-sixth annual report that has been compiled to convey the financial operations of the University System. These reports are intended to form a comprehensive and permanent record of the financial operations of the System for the period covered, and to inform all persons concerned or interested.
Sincerely,

Ronald B. Stark Associate Vice Chancellor for Internal Audits

Annual Financial Report FY2003 2

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA
270 Washington Street, S.W. Atlanta, Georgia 30334

Office of Fiscal Affairs

404-656-2232

January 15, 2004

Chancellor Thomas C. Meredith Board of Regents University System of Georgia
Dear Chancellor Meredith:
In keeping with the by-laws of the Board of Regents, I submit to you the Annual Financial Report of the University System of Georgia for the fiscal year ended June 30, 2003.
The officers of the various institutions represented in this report have assured us that every effort has been made to reflect accurately the information considered important to all concerned parties. In the event that this report is not sufficient in detail or if there is additional information desired, this office will be glad to supply such information.
Sincerely,
William R. Bowes Vice Chancellor for Fiscal Affairs and Treasurer of the Board

Annual Financial Report FY2003 3

UNIVERSITY SYSTEM OF GEORGIA
Annual Financial Report FY2003 4

Institutions Of The University System Of Georgia
RESEARCH UNIVERSITIES
Georgia Institute of Technology ........................................................................................................ Atlanta Georgia State University.................................................................................................................... Atlanta Medical College of Georgia..............................................................................................................Augusta University of Georgia .........................................................................................................................Athens
REGIONAL UNIVERSITIES
Georgia Southern University ........................................................................................................ Statesboro Valdosta State University ................................................................................................................Valdosta
STATE UNIVERSITIES
Albany State University..................................................................................................................... Albany Armstrong Atlantic State University.............................................................................................. Savannah Augusta State University ..................................................................................................................Augusta Clayton College & State University..................................................................................................Morrow Columbus State University ............................................................................................................Columbus Fort Valley State University ........................................................................................................Fort Valley Georgia College & State University ........................................................................................ Milledgeville Georgia Southwestern State University ......................................................................................... Americus Kennesaw State University ........................................................................................................... Kennesaw North Georgia College & State University ..................................................................................Dahlonega Savannah State University ............................................................................................................. Savannah Southern Polytechnic State University ............................................................................................ Marietta State University of West Georgia ..................................................................................................Carrollton
STATE COLLEGES
Dalton State College ........................................................................................................................... Dalton Macon State College...........................................................................................................................Macon
TWO-YEAR COLLEGES
Abraham Baldwin Agricultural College .............................................................................................. Tifton Atlanta Metropolitan College ............................................................................................................ Atlanta Bainbridge College ...................................................................................................................... Bainbridge Coastal Georgia Community College ...........................................................................................Brunswick Darton College................................................................................................................................... Albany East Georgia College .................................................................................................................. Swainsboro Floyd College....................................................................................................................................... Rome Gainesville College......................................................................................................................Gainesville Georgia Perimeter College................................................................................................................ Decatur Gordon College............................................................................................................................Barnesville Middle Georgia College................................................................................................................... Cochran South Georgia College......................................................................................................................Douglas Waycross College .......................................................................................................................... Waycross
INDEPENDENT RESEARCH UNIT
Skidaway Institute of Oceanography ............................................................................................. Savannah
Annual Financial Report FY2003 5

State Resources
The General Appropriations Act of 2003, as amended, provided a total of $1,665,559,739 to the University System of Georgia, with an additional $21,509,000 from Lottery Funds. In addition, indirect funding from the Department of Administrative Services (DOAS) amounted to $3,583,000 and House Bill 1002 provided $6,585,889 from Tobacco funds. House Bill 121 provided $50,000 from the Governor's Discretionary/Emergency Funds. The amounts were as follows:

STATE APPROPRIATIONS AVAILABLE General Appropriations Act of 2003 House Bill 1002
General State Funds Tobacco Funds Indirect DOAS Funding - Communications House Bill 121 General State Funds Lottery Funds Governor's Discretionary/Emergency Funds
Total State Apprpriations Available

$1,724,312,562 6,585,889 3,583,000
(58,752,823) 21,509,000
50,000
$1,697,287,628

ALLOCATIONS BY BOARD OF REGENTS Educational and General
Teaching Governor's Emergency Funds Non-Teaching Tobacco Funds Other Activities Regents Central Office Information Technology Southern Regional Education Board Rental Payments - Georgia Military College GA Public Telecommunications Commission Public Libraries Research Consortium Total Other Activities Special Initiative Funding Scholarships Total Educational and General

$8,786,929.00 29,074,388 810,328 1,700,937 18,565,802 38,515,852 23,228,304

Lottery Funds Equipment, Technology and Construction Trust Fund Special Initiative Funding Georgia Public Telecommunications Commission
Total Lottery Funds

TOTAL ALLOCATIONS BY BOARD OF REGENTS

$1,360,083,297 50,000
154,751,373 6,585,889
120,682,540 33,069,445 556,084
12,000,000 7,509,000 2,000,000

1,675,778,628

21,509,000

1,697,287,628

Annual Financial Report FY2003 6

UNIVERSITY SYSTEM OF GEORGIA
Management's Discussion and Analysis

Introduction

The mission of the University System of Georgia is to contribute to the educational, cultural, economic, and social advancement of Georgia by providing excellent undergraduate general education and first-rate programs leading to associate, baccalaureate, masters, professional, and doctorate degrees; by pursuing leading-edge basic and applied research, scholarly inquiry, and creative endeavors; and by bringing these intellectual resources, and those of the public libraries, to bear on the economic development of the State and the continuing education of its citizens.

The 34 institutions in the University System are led by Chancellor Thomas C. Meredith and the Board of Regents. The University System continues to thrive as shown by the following statistics:

Faculty

Students

FY2003 FY2002 FY2001

10,626 9,484 9,321

241,878 228,326 216,093

Overview of the Financial Statements and Financial Analysis
The University System of Georgia is proud to present its consolidated financial statements for fiscal year 2003. These consolidated statements contain information from the 34 institutions of the University System of Georgia, the Skidaway Institute of Oceanography and the University System Office. Each institution has prepared a separate financial statement that is available on CD. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets, the Statement of Revenues, Expenses, and Changes in Net Assets, and the Statement of Cash Flows. This discussion and analysis of the University System's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2002 and FY2003.
Statement of Net Assets
The Statement of Net Assets presents the assets, liabilities, and net assets of the University System as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of the University System of Georgia. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and

Annual Financial Report FY2003 7

non-current), and Net Assets (Assets minus Liabilities). The difference between current and noncurrent assets will be discussed in the footnotes to the financial statements.
From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.
Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.
Statement of Net Assets, Condensed

Assets: Current Assets Capital Assets, net Other Assets Total Assets
Liabilities: Current Liabilities Non-current Liabilities Total Liabilities
Net Assets: Invested in Capital Assets, net of debt Restricted - nonexpendable Restricted - expendable Capital Projects Unrestricted Total Net Assets

June 30, 2003
$883,185,426.78 3,146,768,290.73
162,384,985.86 4,192,338,703.37

June 30, 2002
$966,835,028.82 2,810,119,287.23
145,637,647.48 3,922,591,963.53

474,088,280.68 166,866,762.53 640,955,043.21

452,263,422.02 98,283,115.86
550,546,537.88

2,997,802,256.47 112,806,976.68 155,958,939.35 26,091,334.00 258,724,153.66
$3,551,383,660.16

2,727,599,446.53 97,669,729.77
149,575,342.19 31,180,607.13
366,020,300.03 $3,372,045,425.65

The total assets of the University System increased by $269,746,739.84. However, a review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $336,649,003.50 of investment in plant, net of accumulated depreciation. See Note 1 in the notes to the financial statements for additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets. The
Annual Financial Report FY2003 8

consumption of assets follows the system-wide philosophy to use available resources to acquire and improve all areas of the system to better serve the instruction, research and public service missions of the system. The total liabilities for the year increased by $90,408,505.33. The combination of the increase in total assets and the increase in total liabilities yields an increase in total net assets of $179,338,234.51. The increase in total net assets is primarily in the category of invested in capital assets, net of debt, in the amount of $270,202,809.94. Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.
Annual Financial Report FY2003 9

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

Operating Revenues Operating Expenses Operating Loss
Non-operating Revenues and Expenses
Income (Loss) Before other revenues, expenses, gains or losses
Other revenues, expenses, gains or losses
Increase in Net Assets
Net Assets at beginning of year, as originally reported Cumulative effect of changes in accounting principle Prior Year Adjustments Net Assets at beginning of year, restated
Net Assets at End of Year

June 30, 2003
$2,494,321,119.24 4,376,598,080.44 (1,882,276,961.20)
1,674,185,312.09

June 30, 2002
$2,234,290,183.51 4,036,290,127.38 (1,801,999,943.87)
1,809,827,872.33

(208,091,649.11) 256,828,765.61
48,737,116.50 3,372,045,425.65
130,601,118.01 3,502,646,543.66 $3,551,383,660.16

7,827,928.46 160,088,678.36 167,916,606.82 6,272,622,068.06 3,068,493,249.23 3,204,128,818.83 $3,372,045,425.65

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase of $179,338,234.51 in the net assets at the end of the year. However, since the increase in operating expenses of $340,307,953.06 exceeded the increase in operating revenues of $260,030,935.73, the operating loss for FY2003 exceeded the operating loss for FY2002 by $80,277,017.33. Non-operating revenue was also reduced in FY2003, due to a decrease of $128,460,679.85 in State Appropriations. The total increase in net assets for FY2003 was $119,179,490.32 less than in FY2002. Details of this statement follow with statements showing Revenue by Source and Expenses by Functional Classification.

Annual Financial Report FY2003 10

Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

Operating Revenue Tuition and Fees Grants and C ontracts Sales and Services of Educational Departments Auxiliary Other
Total Operating Revenue
Nonoperating Revenue State Appropriations Gifts Investment Income Grants and C ontracts Other
Total Nonoperating Revenue
C apital Gifts and Grants State C apital Appropriations Other C apital Gifts and Grants
Total C apital Gifts and Grants
Total Revenues

June 30, 2003

June 30, 2002

$570,298,081.98 1,208,587,381.11
51,596,501.97 335,192,255.69 328,646,898.49
2,494,321,119.24

$506,512,324.12 1,056,051,583.77
56,801,720.58 311,475,418.96 303,449,136.08
2,234,290,183.51

1,665,129,790.91 9,684,629.26
16,588,224.53 55,866,901.28 (10,618,147.69)
1,736,651,398.29

1,793,590,470.76 10,697,140.73 13,930,132.25 48,470,204.50 (4,399,603.45)
1,862,288,344.79

129,674,712.73 71,287,151.60
200,961,864.33
$4,431,934,381.86

99,792,301.97 11,826,171.89
111,618,473.86
$4,208,197,002.16

Expenses by Functional Classification For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses Instruction Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003
$1,106,544,961.84 683,416,860.74 417,577,218.16 301,107,123.95 156,265,948.10 656,951,921.26 310,099,022.84 260,566,765.84 299,624,127.46 30,871,288.17 153,572,842.08
4,376,598,080.44
6,599,184.92
$4,383,197,265.36

June 30, 2002
$1,071,327,375.07 568,155,363.20 383,126,956.07 282,209,328.16 149,668,564.88 605,038,421.88 311,025,084.85 216,566,650.44 273,638,340.91 17,771,997.62 157,890,993.38
4,036,419,076.46
3,990,267.96
$4,040,409,344.42

Annual Financial Report FY2003 11

Statement of Cash Flows

The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Year Ended June 30, 2003, Condensed:

Cash Provided (used) By: Operating Activities Non-capital Financing Activities Capital and Related Financing Activities Investing Activities
Net Change in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2003
($1,698,242,172.09) 1,740,941,414.23 (180,443,147.08) (29,488,111.56)
(167,232,016.50) 618,095,506.73
$450,863,490.23

Capital Assets
The University System had many significant capital asset additions and renovations during FY2003. Some of these additions and renovations include the following:
At Georgia Institute of Technology: The Student Health Center (6.3 M).
At Medical College of Georgia: The Wellness Center (5.3 M).
At University of Georgia: The Fanning Leadership Center (4.1 M) and Phase I of the D. W. Brooks Drive Infrastructure and Pedestrian Mall (3.4 M).
At Georgia Southern University: Science Nursing Building (19.5 M) and renovation of the Fine Arts Building (4.2 M).
At Valdosta State University: Phase II University Center renovation (2.8 M).
At Armstrong Atlantic State University: Major renovation of Solms/Hawes Halls (4.8 M).
Annual Financial Report FY2003 12

At Augusta State University: Allgood Hall (17.2 M), and Chilled Water Loop (1.1 M).
At Georgia College and State University: Herty Science Building (4.3 M)
At Georgia Southwestern State University: Renovation of Crawford Wheatley Hall Building (2 M)
At Savannah State University: Renovation of Drew Griffith Academic Building (3.6 M)
At East Georgia College: Classroom Addition/Activity Center (4.3 M)
At Gordon College: Instructional Complex (12 M)
At the University System Office: A residence to be used as a home for the Chancellor (1.9 M). This residence was purchased in partnership with Georgia State University.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements and the details in each institution's individual Annual Financial Report.
Economic Outlook
In fiscal year 2003, state appropriations to the University System of Georgia declined by $128.5 million through a series of budget reductions implemented over the course of the year. Further state appropriations reductions representing 2.5% of the University System's base budget have been put into effect in fiscal year 2004, bringing the cumulative amount of budget reductions since fiscal year 2002 to about $253 million. Although the state of Georgia is recovering from the recent recession and state tax revenues are rebounding from the low levels of the past two years, the pace of recovery has been slow. It is anticipated therefore that further cuts in the University System of Georgia's budget will be forthcoming in FY 2005.
Despite the trend in state appropriations, the outlook for the University System may be more positive this year and next due to continuing enrollment growth across the system. The growth should result in increased formula funding and higher tuition revenue, both of which will lessen the impact of budget cuts. Overall, the system is in a strong financial position. There do not appear to be any conditions or factors that would substantially affect its operations or financial position.
_______________________ William Bowes Vice Chancellor for Fiscal Affairs University System of Georgia
Annual Financial Report FY2003 13

Statement of Net Assets

UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2003

ASSETS Current Assets C ash and C ash Equivalents Short-term Investments Accounts Receivable, net Inventories Other Assets Total C urrent Assets

$445,581,096.59 98,161,727.72
267,013,214.60 22,363,596.05 50,065,791.82
883,185,426.78

Non-current Assets Noncurrent C ash Investments Notes Receivable, net C apital Assets, net Total Non-current Assets TOTAL ASSETS

5,282,393.64 111,111,142.33
45,991,449.89 3,146,768,290.73 3,309,153,276.59 4,192,338,703.37

LIABILITIES Current Liabilities Accounts Payable and Accrued Liabilities Deposits Deferred Revenue Other Liabilities Deposits Held for Other Organizations C ompensated Absences (current portion) Total C urrent Liabilities Non-current Liabilities C ompensated Absences Long-term Liabilities Total Non-current Liabilities TOTAL LIABILITIES

77,496,030.29 21,009,183.32 238,631,316.75 33,638,080.76 29,470,390.14 73,843,279.42 474,088,280.68
55,687,823.02 111,178,939.51 166,866,762.53 640,955,043.21

NET ASSETS Invested in C apital Assets, net of related debt Restricted for Nonexpendable Expendable C apital Projects Unrestricted TOTAL NET ASSETS

2,997,802,256.47
112,806,976.68 155,958,939.35
26,091,334.00 258,724,153.66 $3,551,383,660.16

Annual Financial Report FY2003 14

Statement of Revenues, Expenses and Changes in Net Assets

UNIVERSITY SYSTEM OF GEORGIA STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2003

REVENUES Operating Revenues
Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships
Federal Appropriations Federal Grants and Contracts State and Local Grants and Contracts Nongovernmental Grants and Contracts Sales and Services of Educational Departments Auxiliary Enterprises Other Operating Revenues
Total Operating Revenues EXPENSES Operating Expenses
Salaries: Faculty Staff
Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation
Total Operating Expenses Operating Income (loss) NON-OPERATING REVENUES (EXPENSES) State Appropriations Gifts Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Other Non-operating Revenues Net Non-operating Revenues Income before other revenues, expenses, gains, or loss State Capital Appropriations Capital Grants and Gifts Federal Grants & Contracts State Grants & Contracts Other Grants and Contracts Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Cumulative effect of changes in accounting principle Prior Year Adjustments Net Assets-beginning of year, restated
Net Assets-End of Year

$710,816,085.85 (140,518,003.87)
15,374,929.46 703,408,253.69 195,633,271.15 309,545,856.27
51,596,501.97 335,192,255.69 313,271,969.03 2,494,321,119.24
771,700,086.68 1,243,388,026.30
506,379,683.29 9,725,017.71
41,031,107.40 265,907,444.88 131,114,952.73 1,208,883,298.82 198,468,462.63 4,376,598,080.44 (1,882,276,961.20)
1,665,129,790.91 9,684,629.26
16,588,224.53 (6,599,184.92) (10,618,147.69) 1,674,185,312.09 (208,091,649.11) 129,674,712.73 71,287,151.60 20,716,495.67 1,623,692.68 33,526,712.93 256,828,765.61 48,737,116.50
3,372,045,425.65
130,601,118.01 3,502,646,543.66 $3,551,383,660.16

Annual Financial Report FY2003 15

Statement of Cash Flows
UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF CASH FLOWS
For the Year Ended June 30, 2003
CASH F LOWS F ROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k ing /T r a ns p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities
CASH F LOWS F ROM NON-CAPITAL F INANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities
CASH F LOWS F ROM CAPITAL AND RELATED F INANCING ACTIVITIES C apital Grants and Gifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital Debt and Leases Interest Paid on C apital Debt and Leases Net C ash used by C apital and Related Financing Activities
CASH F LOWS F ROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003
$646,002,649.35 14,874,067.42
1,141,702,198.14 63,475,348.22
(1,883,278,300.72) (2,007,321,797.82)
(263,421,945.94) (10,086,237.59) 11,336,913.76
71,220,422.20 72,333,916.99 52,942,462.41 35,011,321.24 22,250,926.75 35,246,282.91 11,936,453.59 287,533,147.00 (1,698,242,172.09)
1,664,448,292.61 5,733,768.19
70,759,353.43 1,740,941,414.23
23,280,803.67 3,308,509.61
(194,744,018.34) (5,978,074.64) (6,310,367.38)
(180,443,147.08)
170,548,041.84 12,174,354.71
(212,210,508.11) (29,488,111.56)
(167,232,016.50) 618,095,506.73 $450,863,490.23

Annual Financial Report FY2003 16

Statement of Cash Flows, continued:
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating Activities
D e p r e c ia tio n C hange in Assets and Liabilities:
Receivables, net I nv e nto r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($1,882,276,961.20) (13,554,731.52)
200,173,509.49
(48,328,413.73) 39,221.83
9,725,936.88 (10,477,576.96) 36,836,245.48
(557,314.71) 10,177,912.35
($1,698,242,172.09)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current Assets

$445,581,096.59 5,282,393.64
$450,863,490.23

** NON-C ASH INVESTING, NON-C APITAL FINANC ING, AND C APITAL AND RELATED FINANC ING TRANSAC TIONS

Fixed assets acquired by incurring capital lease obligations C hange in fair value of investments recognized as a component of interest i C hange in interest receivable affecting interest received Gift of capital assets reducing proceeds of capital grants and gifts

$30,722,785.26 ($69,997.54) $439,807.10
$52,240,736.15

Annual Financial Report FY2003 17

UNIVERSITY SYSTEM OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations The University System of Georgia serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity The University System of Georgia is comprised of thirty-four (34) State supported member institutions of higher education in Georgia. The accompanying financial statements reflect the consolidated operations of the University System of Georgia.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. The University System of Georgia does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, all 34 institutions are considered organizational units of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of their legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University System was also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University System's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of
Annual Financial Report FY2003 18

materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
Basis of Accounting For financial reporting purposes, the University System is considered a special-purpose government engaged only in business-type activities. Accordingly, the University System's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant inter-institution transactions have been eliminated.
The University System has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University System has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The University System accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the Statement of Revenues, Expenses, and Changes in Net Assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University System's grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Annual Financial Report FY2003 19

Inventories Consumable supplies are carried at the lower of cost or market on either the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis.
Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University System's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to the University System of Georgia when complete. For the year ended June 30, 2003, GSFIC transferred capital additions valued at $133,040,306.08 to the University System of Georgia. This resulted in a cumulative total of $1,814,173,914.35 as of June 30, 2003.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Annual Financial Report FY2003 20

Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statement of Revenues, Expenses, and Changes in Net Assets. The University System of Georgia reported accrued liability for compensated absences in the amount of $117,591,808.01 as of 6-30-2002. For FY2003, this amount was adjusted for FICA and a 360-hour maximum for an addition of $1,588,678.01, resulting in an adjusted beginning balance of $119,180,486.02. Also for FY2003, $99,463,791.80 was earned in compensated absences and employee payments and adjustments were $89,113,175.38 for a net increase of $11,939,294.43. The ending balance as of 6-30-2003 in accrued liability for compensated absences is $129,531,102.41.
Noncurrent Liabilities Non-current liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The University System's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the University System's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations' as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University System may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the University System is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the University System is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Annual Financial Report FY2003 21

Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

June 30, 2003

R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted Total Unrestricted Net Assets

$52,867,588.80 105,381,222.62
9,786,276.39 90,689,065.85 $258,724,153.66

When an expense is incurred that can be paid using either restricted or unrestricted resources, the University System's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes The University System of Georgia, as a political subdivision of the State of Georgia, is excluded from federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues The University System has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most federal, state and local grants and contracts and federal appropriations, and (4) interest on institutional student loans.
Non-operating revenues: Non-operating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as non-operating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.

Annual Financial Report FY2003 22

Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University System, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other federal, state or nongovernmental programs, are recorded as either operating or non-operating revenues in the University System's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University System has recorded contra revenue for sponsored and unsponsored scholarships.
Annual Financial Report FY2003 23

Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus the University System of Georgia) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus the University System of Georgia), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Annual Financial Report FY2003 24

Categorization of Deposits

The University System's cash deposits are categorized by risk as follows:

Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the University System or by its agent in the University System's name.

Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University System's name.

Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the University System's name, and amounts uncollateralized.

Cash Deposits as of June 30, 2003: (for all institutions)

Cash Deposits Investment Portfolio Accounts

Carrying Amount
$219,976,097.24 81,029,664.93

Bank Balances
$320,957,056.24 55,933,003.62

Risk Categories

1

2

3

$12,940,641.98 $129,764,299.21 $175,186,194.38

31,118,051.79

11,977.54 24,802,974.29

Total Cash Deposits

$301,005,762.17 $376,890,059.86 $44,058,693.77 $129,776,276.75 $199,989,168.67

Categorization of Investments
The University System's investments are categorized as to credit risk within the three categories described below:
Category 1 - Insured or registered, or securities held by the University System or its agent in the University System's name.
Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University System's name.
Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University System's name.

Annual Financial Report FY2003 25

At June 30, 2003, the University System's investments consisted of the following: (for all institutions)

Type of Investments

Risk C ategories

1

2

3

C arrying Amount

C ommon Stock C orporate Bonds U.S. Government Securities and C orporate Obligations

$4,978,243.24 7,805,368.02
47,479,035.79

$7,629.62 21,444.32
386.55

$0.00 692,408.38

$4,985,872.86 7,826,812.34
48,171,830.72

Totals

$60,262,647.05

$29,460.49

$692,408.38

$60,984,515.92

Investments Not Subject to C ategorizations: Board of Regents
Short-Term Fund Total Return Fund Balanced Income Fund Legal Fund Gilbert Trust Fund Bank of American Bond Funds Investment Portfolio Accounts Mutual Funds Real Estate State Investment Pool Short Term Investments Investment in GHEAC Loans
Total Investments

73,933,914.94 62,653,282.08
3,106,916.83 2,882,095.19 1,593,478.49 12,426,482.87
23,765,779.52 241,927.49
93,514,928.59 9,937,430.53
13,029,870.01 $358,070,622.46

Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University System did not own any specific, identifiable investment securities of the pool.

Annual Financial Report FY2003 26

Note 3. Accounts Receivable Consolidated accounts receivable consisted of the following at June 30, 2003.

Student Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal, State, and Private Funds O the r Sub Total Less Allowance for Doubtful Accounts

$45,857,479.31 26,936,490.59
165,117,106.65 34,477,209.12
272,388,285.67 5,375,071.07

Net Accounts Receivable

$267,013,214.60

Note 4. Inventories Consolidated inventories consisted of the following at June 30, 2003.

B o o k sto re Food S e rv ice s P hy sica l P la nt O the r
Tota l

$16,804,666.68 1,189,459.45 1,918,815.52 2,450,654.40
$22,363,596.05

Note 5. Notes/Loans Receivable
Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program). These loans comprise substantially all of the loans receivable at June 30, 2003. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University System for amounts cancelled under these provisions. As the University System determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The University System has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2003 the system-wide allowance for uncollectible loans was approximately $1,348,744.78.
.

Annual Financial Report FY2003 27

Note 6. Capital Assets

Following are the consolidated changes in capital assets for the year ended June 30, 2003:

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$108,869,682.43 40,946,844.71
149,816,527.14

Additions
$4,209,025.11 77,313,792.04 81,522,817.15

Reductions
$431,399.25 27,669,562.83 28,100,962.08

Ending Balance 6/30/2003
$112,647,308.29 90,591,073.92
203,238,382.21

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

114,535,815.63 3,102,926,790.35
92,878,053.90 858,366,617.44
26,921,965.45 484,734,956.10
11,042,875.93 4,691,407,074.80

20,213,293.06 301,885,072.60
41,318,455.81 100,492,260.52
29,712,104.39 43,359,579.72
2,223,764.60 539,204,530.70

11,855,137.76 72,573,132.41
8,424,722.38 91,519,382.82
4,033,976.38 18,203,814.46
149,739.61 206,759,905.82

122,893,970.93 3,332,238,730.54
125,771,787.33 867,339,495.14
52,600,093.46 509,890,721.36
13,116,900.92 5,023,851,699.68

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

47,340,786.33 1,016,179,865.45
50,344,433.62 551,005,682.59
3,508,161.17 342,564,439.21
553,127.15 2,011,496,495.52

4,871,131.22 117,389,569.08
8,023,063.29 82,806,202.04
2,819,697.03 35,567,369.35
37,848.61 251,514,880.62

8,401,765.55 91,901,777.84
5,968,101.84 66,005,065.68
1,523,340.42 8,876,732.85
12,800.80 182,689,584.98

43,810,152.00 1,041,667,656.69
52,399,395.07 567,806,818.95
4,804,517.78 369,255,075.71
578,174.96 2,080,321,791.16

Total Capital Assets, Being Depreciated, Net 2,679,910,579.28 287,689,650.08 24,070,320.84 2,943,529,908.52

Capital Assets, net

$2,829,727,106.42 $369,212,467.23 $52,171,282.92 $3,146,768,290.73

Annual Financial Report FY2003 28

Note 7. Deferred Revenue Consolidated deferred revenue consisted of the following at June 30, 2003.

P re pa id Tuitio n a nd Fe e s Research O the r D e fe rre d R e v e nue
To ta ls

$129,612,523.00 61,438,823.44 47,579,970.31
$238,631,316.75

Note 8. Long-Term Liabilities

Consolidated long-term liability activity for the year ended June 30, 2003 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total

Beginning Balance July 1, 2002
$81,474,311.06
119,180,486.02 2,301,451.78
121,481,937.80

Additions $37,450,070.02
99,463,791.80 135,545.25
99,599,337.05

Reductions

Ending Balance June 30, 2003

$5,111,458.49 $113,812,922.60

89,113,175.38 85,170.17
89,198,345.55

129,531,102.44 2,351,826.86
131,882,929.30

Current Portion
$4,897,956.26
73,843,279.42 87,853.69
73,931,133.11

Total Long Term Obligations

$202,956,248.86 $137,049,407.07 $94,309,804.04 $245,695,851.90 $78,829,089.37

(a) The beginning balance includes the amount shown as current in FY2002 and reclassified as long-term in FY2003.

Note 9. Lease Obligations
The University System of Georgia is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property.
Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2003, were as follows:

Annual Financial Report FY2003 29

Lease Obligations: (for all institutions)

Year Ending June 30:

Year

2004

1

2005

2

2006

3

2007

4

2008

5

2009 through 2013

6-10

2014 through 2018

11-15

2019 through 2023

16-20

2024 through 2028

21-25

2029 through 2033

26-30

2034 through 2038

31-35

2039 through 2043

36-40

Total minimum lease payments

Less: Interest

Less: Executory costs (if paid)

Principal Outstanding

Real Property

Capital Leases

Operating Leases

$11,864,670.22 11,362,652.54 10,688,899.39 10,039,822.66 10,095,771.93 49,039,965.39 49,065,579.03 37,238,878.76 13,053,156.95 5,431,666.54

$13,326,866.49 4,515,138.66 4,051,198.25 3,564,586.31 2,860,289.66 7,232,006.00 180,650.00 50.00 50.00

$207,881,063.42
92,846,631.02 1,270,144.00
$113,764,288.40

$35,730,835.36

CAPITAL LEASES
Several of the institutions in the University System of Georgia had capital leases as of June 30, 2003. Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2004 and 2032. System-wide expenditures for fiscal year 2003 were $11,710,643.41 of which $6,599,184.92 represented interest. Total principal paid on capital leases was $5,111,458.49 for the fiscal year ended June 30, 2003. Interest rates ranged from 2.25 percent to 11 percent.
Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms.
Details for each capital lease is included with the individual institution financial report. Some of the major leases are listed below.
The University of Georgia occupies three real properties and holds various equipment items under capital leases. All three of the University of Georgia's current real property capital leases are with the University of Georgia Real Estate Foundation (UGAREF), a related entity. In June of 2001, the University of Georgia entered into a capital lease with the UGAREF whereby the University leases a building for a 10-year period that began June 1, 2001 and expires June 30, 2011. In August of 2001, the University of Georgia entered into a second capital lease with the UGAREF, whereby the University leases the Carlton Street Parking Deck for a 30-year period that began September 30, 2001 and expires August 31, 2031. In November of 2002, the University of Georgia entered into the third capital lease with the UGAREF whereby leases the East Village Parking Deck for a 30-year period that began on November 1, 2002 and expires
Annual Financial Report FY2003 30

December 1, 2032. The outstanding liability at June 30, 2003 on these capital leases is $12,580,386.90.
Georgia State University has two capital leases associated with buildings. In July 2001, Georgia State University entered into a capital lease valued at $34,650,000.00 with an effective interest rate of 6.985 percent with the Georgia State University Foundation (GSUF), whereby the University leases the Student Recreation Center for a twenty-year period that began July 2001 and expires June 2021. In March 2000, the University entered into a capital lease valued at $14,038,328.00 with an effective interest rate of 6.985 percent with the GSUF whereby the University leases the Alpharetta Center for a twenty-year period that began March 2000 and expires February 2020. The outstanding principal liability at June 30, 2003 on these capital leases is $32,938,935.52 and $12,826,289.92 respectively. Each year, the monthly payments for both of these leases will increase by the greater of 2% or the CPI. Georgia State University also has various capital leases for equipment with an outstanding balance at June 30, 2003 in the amount of $471,898.36
Georgia Institute of Technology is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property. The outstanding balance as of June 30, 2003 is $ 3,188,686.11.
Georgia Southern University had one capital lease with related entities in the current fiscal year. In March 1995, Georgia Southern University entered into a capital lease of $3,000,000.00 at 5.5 percent with the Georgia State Financing & Investment Commission, a party external to the system, whereby the University leases a building for a thirty-year period that began March 1995 and expires February 2025. The outstanding liability at June 30, 2003 on the capital lease is $2,570,439.96.
Valdosta State University has several capital leases with the Valdosta State University Foundation, a related entity. The lease purchase obligation at June 30, 2003 on these capital leases is $429,595.77. The University at its option may terminate the leases.
Kennesaw State University is obligated under a capital lease for the use of real property. The capital lease is payable in monthly installments and expires in 2027. Expenditures for fiscal year 2003 were $1,373,924.25.
Georgia Perimeter College has one capital lease on the Gwinnett University Center. In November 2001, Georgia Perimeter entered into this 22-year lease valued at $15,602,864.32 with an implicit interest rate of 5.15 percent. This lease will expire in 2023.
The University System Office entered into two new Capital Lease Obligations in FY 2003. In July a lease purchase was completed for the purchase of numerous items of equipment. This is Obligation Number 489 with Bank of America. Total principal amount is $590,441.80 with $522,670.00 for capitalizable equipment. The interest rate is 3.66 percent with payment terms through FY 2006. In September another lease purchase was completed for the right to use of Campus Pipeline software. This is Obligation Number 471 with Bank of America. Total
Annual Financial Report FY2003 31

principal amount is $2,774,400.00, all of which is to be capitalized. The interest rate is 3.71 percent with payment terms through FY 2007. OPERATING LEASES The University System of Georgia's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2004 through 2025. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment. System-wide, remaining payments on operating leases total $35,730,835.36.
Annual Financial Report FY2003 32

Note 10. Retirement Plans

TEACHERS RETIREMENT SYSTEM OF GEORGIA

Plan Description The University System of Georgia participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of the University System of Georgia who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The University System of Georgia makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions at all institutions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$107,129,310.57 $105,288,726.51 $122,868,172.57

REGENTS RETIREMENT PLAN

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.

Funding Policy The institutions of the University System of Georgia make monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statue and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation.

Annual Financial Report FY2003 33

Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.
The institutions of the University System of Georgia and the covered employees made the required contributions of $56,947,692.66 (10.02%) and $28,479,353.62 (5%), respectively.
GEORGIA DEFINED CONTRIBUTION PLAN
Plan Description The University System of Georgia participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $5,267,178.77 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
The University System of Georgia has a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. The University System of Georgia and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue
Annual Financial Report FY2003 34

Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. The University System of Georgia is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although the University System of Georgia expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against the University System of Georgia, if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
Note 13. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life
Annual Financial Report FY2003 35

insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 11,151 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, the institutions of the University System of Georgia recognized as incurred $40,732,959.44 of expenditures, which was net of $14,722,802.96 of participant contributions.
Annual Financial Report FY2003 36

Note 14. Natural Classifications with Functional Classifications The University System's consolidated operating expenses by functional classification for FY2003 are shown below.
Functional Classification

Natural Classification
Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation
Total Expenses

Instruction
$558,840,665.72 217,001,584.32 175,428,791.22 3,233,806.03 10,334,153.96 (3,952,368.75) 9,970,522.06 108,312,909.67 27,374,897.61
$1,106,544,961.84

Research
$161,158,665.52 207,555,627.24
67,872,101.21 4,327,413.32 14,354,157.28 1,593,798.37 4,126,545.42 194,002,577.43 28,425,974.95
$683,416,860.74

Public Service
$39,093,544.61 138,783,385.41 41,938,264.44
990,843.72 5,076,024.73
524,470.71 23,572,004.46 160,588,697.63 7,009,982.45
$417,577,218.16

Academic Support
$8,733,535.48 152,502,706.86 40,330,313.92
359,979.12 2,861,539.39
218,697.11 3,618,510.23 68,294,649.66 24,187,192.18
$301,107,123.95

Student Services
$620,720.17 87,144,230.47 20,331,620.12
195,031.90 2,356,864.48
760,855.47 2,188,844.32 40,128,850.71 2,538,930.46
$156,265,948.10

Natural Classification
Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation
Total Expenses

Functional Classification

Institutional Support

Plant Operations & Maintenance

Scholarships & Fellowships

Auxiliary Enterprises

Unallocatted Expenses

Patient Care

Total Expenses

$1,034,453.77 192,391,020.80 97,785,599.83
396,743.80 2,667,741.50 (2,229,485.89) 9,194,124.23 324,212,712.46 31,499,010.76

$253,754.13 109,279,360.20
29,000,601.41 (9,389,276.39)
203,420.28
63,204,729.82 89,190,160.13
28,356,273.26

$91,500.00 22,630.58 492,505.59
80.64 259,578,048.91
382,000.12

$393,339.72 74,469,454.69 16,704,598.09
9,610,476.21 2,992,221.11 9,413,428.95 14,923,380.99 150,899,882.44 20,217,345.26

$0.00 3,188.08
2,009,244.39 28,858,855.70

$1,477,429.77 64,240,503.52 16,492,099.38
184,904.03
316,291.20 70,861,614.18

$771,697,608.89 1,243,390,504.09 506,379,683.29
9,725,017.71 41,031,107.40 265,907,444.88 131,114,952.73 1,208,883,298.82 198,468,462.63

$656,951,921.26

$310,099,022.84 $260,566,765.84 $299,624,127.46 $30,871,288.17 $153,572,842.08 $4,376,598,080.44

Annual Financial Report FY2003 37

Board of Regents of the University System of Georgia
Office of Internal Audit 270 Washington Street, SW., Atlanta, Georgia 30334
(404)-656-2237
"Creating a More Educated Georgia" www.usg.edu

ABRAHAM BALDWIN AGRICULTURAL COLLEGE
Financial Report
For the Year Ended June 30, 2003

Abraham Baldwin Agricultural College Tifton, Georgia

Michael F. Vollmer
President

Floyd E. Wright
Vice President for Fiscal Affairs

ABRAHAM BALDWIN AGRICULTURAL COLLEGE ANNUAL FINANCIAL REPORT FY 2003
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 7 Statement of Revenues, Expenses and Changes in Net Assets............................................ 8 Statement of Cash Flows ..................................................................................................... 9 Note 1 Summary of Significant Accounting Policies ...................................................... 11 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 16 Note 3 Accounts Receivable............................................................................................. 18 Note 4 Inventories............................................................................................................. 19 Note 5 Notes/Loans Receivable........................................................................................ 19 Note 6 Capital Assets........................................................................................................ 20 Note 7 Deferred Revenue.................................................................................................. 21 Note 8 Long-Term Liabilities ........................................................................................... 21 Note 9 Lease Obligations.................................................................................................. 21 Note 10 Retirement Plans ................................................................................................. 22 Note 11 Risk Management................................................................................................ 23 Note 12 Contingencies...................................................................................................... 24 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 24 Note 14 Natural Classifications With Functional Classifications..................................... 26

ABRAHAM BALDWIN AGRICULTURAL COLLEGE
Management's Discussion and Analysis

Introduction

Abraham Baldwin Agricultural College is one of the 34 institutions of the University System of Georgia. The College, located in Tifton, Georgia, was founded in 1908 as the Second District A&M School. Since then, the College has changed its name to the South Georgia A&M College, the Georgia State College for Men, and in 1933 to its present name. It has become known for its programs in agriculture, environmental sciences, turf grass, and forestry resources. The College offers associate degrees in a wide variety of subjects and features comprehensive offerings in a total of 52 two-year career and transfer programs. This wide range of educational opportunities attracts a highly qualified faculty and a student body of more than 3,000 students. The institution continues to grow as shown by the comparison numbers that follow.

Faculty

Students

FY2003 FY2002 FY2001

139

3,033

137

2,857

126

2,630

Overview of the Financial Statements and Financial Analysis

Abraham Baldwin Agricultural College is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2002 and FY 2003.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Abraham Baldwin Agricultural College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and noncurrent), and Net Assets (Assets minus Liabilities). The difference between current and noncurrent assets will be discussed in the footnotes to the financial statements.

Annual Financial Report FY 2003 (Version 1.0) 1

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

A s s e ts : C urrent A ssets C apital A ssets, net O ther A ssets Total Assets

June 30, 2003
$4,057,680.27 15,666,107.66
632,333.37 20,356,121.30

June 30, 2002
$6,969,601.57 13,714,452.56
787,571.46 21,471,625.59

Lia b ilitie s : C urre nt Liabilities Noncurre nt Liabilities Total Liabilities

1,254,261.65 438,534.24
1,692,795.89

4,893,427.60 4,893,427.60

Net Assets:

Invested in C apital A ssets, net of debt 15,666,107.66

Restricted - nonexpendable

Restricted - expendable

886,856.16

C apital Projects

U n r e s tr ic te d

2,110,361.59

Total Net Assets

$18,663,325.41

13,714,452.56
1,810,006.35 103,149.89 950,589.19
$16,578,197.99

The total assets of the institution decreased by ($1,115,504.29). However, a review of the Statement of Net Assets will reveal that the decrease was primarily due to a decrease of $2,143,608.51 in accounts receivable. This decrease was the result of a change in accounting methods whereby future year student fees are not recorded in the current fiscal year as an accounts receivable. See Note 1 in the notes to the financial statements for information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets.
The total liabilities for the year decreased by ($3,200,631.71). The primary cause for the decrease was in deferred revenue in the amount of ($2,504,673.63). The deferred revenue
Annual Financial Report FY 2003 (Version 1.0) 2

decrease was due to a change in accounting methods and is the offset to the decrease in accounts receivable discussed above. The combination of the decrease in total assets of ($1,115,504.29) and the decrease in total liabilities of ($3,200,631.71) yields an increase in total net assets of $2,085,127.42.

Statement of Revenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30, 2003

Operating Revenues Operating Expenses Operating Loss

$13,487,375.49 26,433,839.59 (12,946,464.10)

June 30, 2002
$13,295,367.03 26,051,313.43 (12,755,946.40)

Nonoperating Revenues and Expenses

12,435,912.49

13,230,979.09

Incom e (Loss) B efore other revenues, expenses, gains or losses

(510,551.61)

475,032.69

Other revenues, expenses, gains or losses

1,087,020.03

Increase in Net Assets

576,468.42

475,032.69

Net Assets at beginning of year, as originally reported C um ulative effect of changes in accounting principle Prior Year Adjustm ents Net Assets at beginning of year, restated

16,578,197.99
1,508,659.00 18,086,856.99

46,702,341.88 30,599,176.58
16,103,165.30

Net Assets at End of Year

$18,663,325.41

$16,578,197.99

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:
Annual Financial Report FY 2003 (Version 1.0) 3

Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

Operating Revenue Tuition and Fees G rants and C ontracts Sales and S ervices of Educational D epartm ents A ux ilia r y O the r
Total Operating Revenue
Nonoperating Revenue State A ppropriations G ifts Investment Income G rants and C ontracts O the r
Total Nonoperating Revenue
C apital G ifts and Grants State C apital Appropriations Other C apital G ifts and Grants
Total C apital Gifts and G rants
Total Revenues

June 30, 2003

June 30, 2002

$2,331,705.90 5,642,768.82 191,281.92 5,134,508.24 187,110.61
13,487,375.49

$2,569,342.52 5,467,847.03 196,201.97 4,768,490.47 293,485.04
13,295,367.03

12,444,781.84
47,328.54 24,196.03 (56,197.89)
12,460,108.52

13,100,066.00 125,563.37 5,349.72
13,230,979.09

1,062,824.00 1,062,824.00 $27,010,308.01

0.00 $26,526,346.12

Annual Financial Report FY 2003 (Version 1.0) 4

Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003
$9,049,933.63
770,318.84 1,542,022.18 1,802,151.65 3,818,956.03 2,043,768.78 1,513,613.07 4,985,615.38
907,460.03
26,433,839.59
$26,433,839.59

June 30, 2002 $9,300,662.93
840,578.84 1,384,838.05 1,740,562.37 4,412,971.52 2,197,936.62 1,563,302.04 4,610,461.06
26,051,313.43
$26,051,313.43

The revenues statement reflects an increase of $1,062,824.00 in the Other Capital Gifts and Grants category. Of this amount, $920,000.00 was the result of a building called the Red Hill Athletic Complex being built with private funds through the ABAC Foundation that was donated to the College. The other $95,100.00 is an increase in the value of our stuffed animal collection located in the Mathematics/Science Department.
The expenditure statement reflects an increase of $907,460.06 in the Unallocated Expenses category. This is primarily depreciation expense due to reclassification of assets.
The compensation and employee benefits category increased by approximately $162,647.43. The compensation to employees remained basically the same as the prior year due to not receiving a pay raise. The increase is primarily in employee benefits resulting from an increase in health insurance premiums.
Utilities decreased by approximately ($10,196.47) during the past year. The decrease was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2003.
Under non-operating revenues (expenses) state appropriations decreased by approximately ($655,284.16). While it appears that the institution received a substantial amount of new money from the state, given the mandatory cost increases of various categories of expenses, the College actually had a relatively flat funding year with all things considered.
Annual Financial Report FY 2003 (Version 1.0) 5

Statement of Cash Flows
The final statement presented by the Abraham Baldwin Agricultural College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Year Ended June 30, 2003, Condensed

C ash Provided (used) By: Operating Activities Non-capital Financing Activities Investing Activities C apital and Related Financing Activities
Net C hange in C ash C ash, Beginning of Year C ash, End of Year

June 30, 2003
($ 1 2 ,2 7 3 ,2 9 3 .9 6 ) 1 1 ,9 1 3 ,1 1 9 .0 7 4 7 ,3 2 8 .5 4 (4 8 0 ,2 2 1 .1 8 ) (7 9 3 ,0 6 7 .5 3 ) 2 ,0 9 6 ,5 1 5 .3 3 $ 1 ,3 0 3 ,4 4 7 .8 0

Capital Assets
The Red Hill Athletic Center was constructed by the ABAC Foundation. Private fund raising efforts generated $920,000.00 for this facility. After the building was completed, the ABAC Foundation donated it to the College.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Economic Outlook
The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is strong.
_______________________ Michael F. Vollmer, President Abraham Baldwin Agricultural College
Annual Financial Report FY 2003 (Version 1.0) 6

Statement of Net Assets

ABRAHAM BALDWIN AGRIC ULTURAL C OLLEGE

STATEMENT OF NET ASSETS

June 30, 2003

June 30, 2003

ASSETS

Current Assets

C ash and C ash Equivalents

$1,303,447.80

S hort-term Investm ents

A ccounts Receivable, net

2,398,237.08

I n v e n to r ie s

209,885.70

O ther A ssets

146,109.69

Total C urrent A ssets

4,057,680.27

Noncurrent Assets Noncurrent C ash Investm ents Notes Receivable, net C apital A ssets, net Total Noncurrent A ssets TOTAL ASSETS

632,333.37 15,666,107.66 16,298,441.03 20,356,121.30

LIA BILIT IE S Current Liabilities
A ccounts Payable and A ccrued Liabilities D eposits Deferred Revenue O ther Liabilities D eposits Held for O ther Organizations C om pensated A bsences (current portion)
Total C urrent Liabilities Noncurrent Liabilities
C om pensated A bsences Long-term Liabilities
Total Noncurrent Liabilities TOTAL LIABILITIES

441,813.89 84,890.00
204,533.40 6,197.45
174,772.68 342,054.23 1,254,261.65
438,534.24
438,534.24 1,692,795.89

NET ASSETS Invested in C apital A ssets, ne t of related debt Restricted for No ne x p e nd a b le Ex p e nd a b le C apital Projects U n r e s tr ic te d TOTAL NET ASSETS

15,666,107.66
886,856.16 2,110,361.59 $18,663,325.41

Annual Financial Report FY 2003 (Version 1.0) 7

Statement of Revenues, Expenses and Changes in Net Assets

ABRAHAM BALDWIN AGRICULTURAL COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2003
June 30, 2003

RE VE NU E S

Operating Revenues

Student Tuition and Fees

$4,737,979.83

Less: Sponsored and Unsponsored Scholarships

(2,406,273.93)

Federal Appropriations

Federal Grants and C ontracts

5,268,487.63

State and Local Grants and C ontracts

77,248.95

Nongovernmental Grants and C ontracts

297,032.24

Sales and Services of Educational Departments

191,281.92

Auxiliary Enterprises

5,134,508.24

Other Operating Revenues

187,110.61

Total Operating Revenues

13,487,375.49

E XPE NS E S

Operating Expenses

Salaries:

Fa c u lty S ta ff

4,877,660.87 6,476,521.32

B e ne fits Other Personal Services

3,496,750.74

Travel

173,080.20

Scholarships and Fellowships

1,862,613.59

Utilitie s

987,026.51

Supplies and Other Services

7,419,599.00

D e p r e c ia tio n

1,140,587.36

Total Operating Expenses

26,433,839.59

Operating Income (loss) NONOPERATING REVENUES (EXPENSES)

(12,946,464.10)

State Appropriations

12,444,781.84

G ifts

Investment Income (endowments, auxiliary and other) Interest Expense (capital assets)

47,328.54

Other Nonoperating Revenues

(56,197.89)

Net Nonoperating Revenues

12,435,912.49

Income before other revenues, expenses, gains, or loss

(510,551.61)

State C apital Appropriations

C apital Grants and Gifts

1,062,824.00

Federal Grants & C ontracts

24,196.03

State Grants & C ontracts

Other Grants and C ontracts

Total Other Revenues

1,087,020.03

Increase in Net Assets NET ASSETS

576,468.42

Net Assets-beginning of year, as originally reported

16,578,197.99

C umulative effect of changes in accounting principle

Prior Year Adjustments

1,508,659.00

Net Assets-beginning of year, restated

18,086,856.99

Net Assets-End of Year

$18,663,325.41

Annual Financial Report FY 2003 (Version 1.0) 8

Statement of Cash Flows
ABRAHAM BALDWIN AGRIC ULTURAL COLLEGE STATEMENT OF CASH FLOWS
For the Year Ended June 30, 2003
CASH F LOWS F ROM OPERA TING ACT IVITIES Tuition and Fees Federal Appropriations G rants and C ontracts (Exchange) Sales and Services of Educational D epartm ents Paym ents to S uppliers Paym ents to Em ployees Paym ents for Scholarships and Fellowships Loans Issued to Students and Em ployees C ollection of Loans to Students and Em ployees Auxiliary Enterprise C harges: Residence Halls B ookstore Food Services P a r k in g /T r a n s p o r ta tio n Health S ervices Intercollegiate A thletics Other Organizations Other Receipts (paym ents) Net C ash Provided (used) by Operating Activities
CASH F LOWS F ROM NON- CA PITAL F INA NCING ACTIVITIE S State Appropriations Agency Funds Transactions G ifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing A ctivities
CASH F LOWS F ROM CA PITAL AND RELAT ED F INA NCING A CTIVITIES C apital G rants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities
CASH F LOWS F ROM INVESTING A CTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investm ents Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - B eginning of year C ash and C ash Equivalents - End of Year

June 30, 2003
$4,666,323.76
5,704,809.84 205,274.46
(12,532,072.54) (11,325,723.91)
(4,268,887.52) (28,475.63) 183,713.72
1,769,579.64 1,505,496.20
856,638.64 68,157.33
223,548.58 260,266.58 111,989.70 326,067.19 (12,273,293.96)
12,448,846.00 (535,726.93)
11,913,119.07
(480,221.18)
(480,221.18)
47,328.54
47,328.54 (793,067.53) 2,096,515.33 $1,303,447.80

Annual Financial Report FY 2003 (Version 1.0) 9

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOSS TO NET CA SH PROVIDED (USE D) BY OPERA TING ACTIVITIES:
Operating Incom e (loss) A djustm ents to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating A ctivities
D epreciation C hange in Assets and Liabilities:
Receivables, net I n v e n to r ie s Other Assets A ccounts Payable Deferred Revenue Other Liabilities C om pensated Absences
Net C ash Provided (used) by Operating Activities

($12,946,464.10)
1,140,587.36
2,585,171.33 45,924.95 (70,679.69)
(524,701.44) (2,623,084.67)
70,195.57 49,756.73
($12,273,293.96)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current Assets

$1,303,447.80 $1,303,447.80

** NON-C ASH INVESTING, NON-C APITAL FINANC ING, AND C APITAL AND RELATED FINANC ING TRANSAC TIONS

C hange in fair value o f investm ents reco gnized as a co m po nent o f interest inco m e

$31,533.68

Annual Financial Report FY 2003 (Version 1.0) 10

ABRAHAM BALDWIN AGRICULTURAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations Abraham Baldwin Agricultural College serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity Abraham Baldwin Agricultural College is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Abraham Baldwin Agricultural College as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Abraham Baldwin Agricultural College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Abraham Baldwin Agricultural College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the College is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of
Annual Financial Report FY 2003 (Version 1.0) 11

materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
Basis of Accounting For financial reporting purposes, the College is considered a special-purpose government engaged only in business-type activities. Accordingly, the College's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-college transactions have been eliminated.
The college has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The college has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The College accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Resale Inventories are valued at cost using the average-cost basis.
Annual Financial Report FY 2003 (Version 1.0) 12

Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the College's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University system, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Abraham Baldwin Agricultural College when complete. For the year ended June 30, 2003, there were no projects transferred from GSFIC to the College
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a College residence hall.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net
Annual Financial Report FY 2003 (Version 1.0) 13

Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Abraham Baldwin Agricultural College had accrued liability for compensated absences in the amount of $730,831.74 as of 7-1-2002. For FY2003, $1,594,323.81 was earned in compensated absences and employees were paid $1,544,567.08, for a net increase of $49,756.73. The ending balance as of 6-30-2003 in accrued liability for compensated absences is $780,588.47.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The College's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University system of Georgia Administrative Central Office for remittance to the office of Treasury and
Annual Financial Report FY 2003 (Version 1.0) 14

Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.

Unrestricted Net A ssets includes the following item s which are quasi-restricted by m ana gem ent.

R & R Reserve Reserve for Encumbrances Reserv e for Inventory O ther Unrestricted Total Unrestricted Net A ssets

June 30, 2003
$277,374.48 1,038,059.09
209,885.70 585,042.32 $2,110,361.59

When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.

Income Taxes Abraham Baldwin Agricultural College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.

Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:

Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.

Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.

Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the College, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for sponsored and unsponsored scholarships.

Annual Financial Report FY 2003 (Version 1.0) 15

Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus Abraham Baldwin Agricultural College) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus Abraham Baldwin Agricultural College), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Annual Financial Report FY 2003 (Version 1.0) 16

Categorization of Deposits
The College's cash deposits are categorized by risk as follows:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the College or by its agent in the College's name.
Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the College's name.
Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the College's name, and amounts uncollateralized.
Cash Deposits as of June 30, 2003

Cash Deposits Investment Portfolio Accounts
Total Cash Deposits

C arrying Amount

Bank Balances

($77,750.39)

$1,781,296.10 0.00

Risk Categories

1

2

$300,546.25 $1,480,749.85

($77,750.39) $1,781,296.10 $300,546.25 $1,480,749.85

3 $0.00
$0.00

Categorization of Investments
The College's investments are categorized as to credit risk within the three categories described below:
Category 1 - Insured or registered, or securities held by the College or its agent in the College's name
Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the College's name.
Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the College's name.

Annual Financial Report FY 2003 (Version 1.0) 17

At June 30, 2003, the College's investments consisted of the following:

Type of Investm e nts
C om m on S tock C orporate Bonds S ecurities and C orporate O bligations

Risk C ategories

1

2

$0.00

$0.00

3 $0.00

T o ta ls

$0.00

$0.00

$0.00

C arrying Amount
$0.00 0.00 0.00
$0.00

Investm e nts Not S ubject to C ategorizations: B oard of R egents
S hort-Term Fund Balanced Income Fund Total Return Fund Investm e nt Portfolio A ccounts Mutual Funds R eal Estate S tate Investm ent Pool S hort-Term Investm ents
Total Investm ents

1,381,198.19 $1,381,198.19

Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the College did not own any specific, identifiable investment securities of the pool.

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2003.

June 30, 2003

S tudent Tuition and Fees A uxiliary Enterprises and Other Operating A ctivities Fede ral, S tate , and Private Funds O the r
Less A llowance for D oubtful A ccounts

$102,569.80 180,963.72
2,246,852.46 (40,447.02)
2,489,938.96 91,701.88

Net A ccounts Receivable

$2,398,237.08

Annual Financial Report FY 2003 (Version 1.0) 18

Note 4. Inventories

Inventories consisted of the following at June 30, 2003.

B o o k s to r e Food S ervices Physical Plant O th e r
T o ta l

June 30, 2003 $209,885.70
$209,885.70

Note 5. Notes/Loans Receivable
Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2003 and 2002. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the College for amounts cancelled under these provisions. As the College determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education.

Annual Financial Report FY 2003 (Version 1.0) 19

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2003.

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciat

Beginning Balances 7/1/2002
$67,441.25
67,441.25

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

25,608,000.00 607,439.00
2,675,513.06
2,615,925.45 22,600.00
31,529,477.51

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

13,405,623.49 597,422.21
1,778,682.66
2,090,144.00 10,593.84
17,882,466.20

Total Capital Assets, Being Depreciated, 13,647,011.31

Capital Assets, net

$13,714,452.56

Additions $0.00 0.00

Reductions $0.00 0.00

Ending Balance 6/30/2003
$67,441.25 0.00
67,441.25

12,656,000.00
731,413.79
62,353.98 138,200.00 13,587,967.77

11,736,000.00
462,048.41
14,215.00 24,100.00 12,236,363.41

0.00 26,528,000.00
607,439.00 2,944,878.44
0.00 2,664,064.43
136,700.00 32,881,081.87

4,002,030.77 10,016.79
443,450.90
104,335.00 13,751.91
4,573,585.37
9,014,382.40
$9,014,382.40

4,723,972.94 60,743.90
363,043.38
14,215.00 11,660.89 5,173,636.11
7,062,727.30
$7,062,727.30

0.00 12,683,681.32
546,695.10 1,859,090.18
0.00 2,180,264.00
12,684.86 17,282,415.46
15,598,666.41
$15,666,107.66

Annual Financial Report FY 2003 (Version 1.0) 20

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2003.

Prepaid Tuition and Fees Research O ther D eferred Revenue
T o ta ls

June 30, 2003 $17,575.00 186,958.40
$204,533.40

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2003.

Leases Lease Obligations

Beginning Balance July 1, 2002
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2003

$0.00

$0.00

Current Portion
$0.00

Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total

730,831.74 1,594,323.81 730,831.74 1,594,323.81

1,544,567.08 1,544,567.08

780,588.47 0.00
780,588.47

342,054.23 342,054.23

Total Long Term Obligations

$730,831.74 $1,594,323.81 $1,544,567.08 $780,588.47

$342,054.23

(a) The beginning balance includes the amount shown as current in FY2002 and reclassified as long-term in FY2003.

Note 9. Lease Obligations

Abraham Baldwin Agricultural College does not have any operating leases for the use of real property (land, buildings, and office facilities) and equipment. The College also is not obligated under any capital leases and installment purchase agreements for the acquisition of real property.

CAPITAL LEASES

Abraham Baldwin Agricultural College does not have any capital leases at this time.

OPERATING LEASES

Abraham Baldwin Agricultural College does not have any capital leases at this time.

Annual Financial Report FY 2003 (Version 1.0) 21

Note 10. Retirement Plans

Teachers Retirement System Of Georgia

Plan Description Abraham Baldwin Agricultural College participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Abraham Baldwin Agricultural College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Abraham Baldwin Agricultural College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$768,875.05 $780,721.91 $971,084.99

Regents Retirement Plan

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.

Funding Policy Abraham Baldwin Agricultural College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation.

Annual Financial Report FY 2003 (Version 1.0) 22

Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.
Abraham Baldwin Agricultural College and the covered employees made the required contributions of $179,228.05 (10.02%) and $89,435.24 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description Abraham Baldwin Agricultural College participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $31,451.89 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
Abraham Baldwin Agricultural College is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Abraham Baldwin Agricultural College and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per
Annual Financial Report FY 2003 (Version 1.0) 23

person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Abraham Baldwin Agricultural College, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Abraham Baldwin Agricultural College expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Abraham Baldwin Agricultural College (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
Note 13. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the
Annual Financial Report FY 2003 (Version 1.0) 24

group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 135 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, Abraham Baldwin Agricultural College recognized as incurred $484,593.58 of expenditures, which was net of $151,222.22 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 25

Note 14. Natural Classifications With Functional Classifications The College's operating expenses by functional classification for FY2003 are shown below:

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003
Functional Classification FY2003

Natural Classification

Instruction

Research

Public Service

Academic Support

Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation

$4,878,106.87 1,196,470.76 1,452,060.77 0.00 62,739.96 178,408.81 116,111.47 1,152,962.06 13,072.93

$0.00

$664.00 292,141.14 80,569.53
9,808.12 4,775.00 5,144.78 377,216.27

$0.00 745,698.29 170,610.44
20,089.71 8,520.00 10,720.06 476,539.44 109,844.24

Total Expenses

$9,049,933.63

$0.00

$770,318.84

$1,542,022.18

Student Services
$750.00 1,065,803.96
277,736.41
45,486.85 11,850.00 30,996.79 369,527.64
$1,802,151.65

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003

Natural Classification

Inst it ut io nal Suppo rt

P lant Operat io ns & M aintenance

Functional Classification FY2003

Scho larships & Fellowships

A uxiliary Enterprises

Unallo cat ed Expenses

Faculty Staff B enef it s Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciat io n

($ 1,860.00) 1,838,938.68 1,138,496.78
25,384.90
21,104.75 858,802.34
(61,911.42)

$ 0.00 730,618.56 241,710.77 (301,422.07)
834.06
684,542.67 663,798.75
23,686.04

$ 0.00 1,513,613.07

$ 0.00 606,849.93 135,566.04 301,422.07
8,736.60 145,446.71 118,405.99 3,520,752.50 148,435.54

$ 0.00 907,460.03

Total Expenses

$ 3,818,956.03

$ 2,043,768.78

$ 1,513,613.07

$ 4,985,615.38

$ 907,460.03

To t al Expenses
$ 4,877,660.87 6,476,521.32 3,496,750.74 0.00 173,080.20 1,862,613.59 987,026.51 7,419,599.00 1,140,587.36
$ 26,433,839.59

Annual Financial Report FY 2003 (Version 1.0) 26

ALBANY STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2003

Albany State University Albany, Georgia

Portia H. Shields
President

Stanley E. Williams
Senior Vice President for Fiscal Affairs

ALBANY STATE UNIVERSITY ANNUAL FINANCIAL REPORT
FY 2003
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 7 Statement of Revenues, Expenses and Changes in Net Assets............................................ 8 Statement of Cash Flows ..................................................................................................... 9 Note 1 Summary of Significant Accounting Policies ...................................................... 11 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 16 Note 3 Accounts Receivable............................................................................................. 18 Note 4 Inventories............................................................................................................. 18 Note 5 Notes/Loans Receivable........................................................................................ 18 Note 6 Capital Assets........................................................................................................ 19 Note 7 Deferred Revenue.................................................................................................. 20 Note 8 Long-Term Liabilities ........................................................................................... 20 Note 9 Lease Obligations.................................................................................................. 20 Note 10 Retirement Plans ................................................................................................. 21 Note 11 Risk Management................................................................................................ 22 Note 12 Contingencies...................................................................................................... 23 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 23 Note 14 Natural Classifications With Functional Classifications..................................... 25

ALBANY STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Albany State University is one of the 34 institutions of the University System of Georgia. The University, located in Albany, Georgia, was founded in 1903 and has become known for its leadership in teacher education, nursing, criminal justice, business, public administration and the sciences. The University offers Bachelor's, Master's and Education Specialist degrees and a variety of non-degree educational programs. This wide range of educational opportunities attracts a highly qualified faculty and a student body of more than 3,600 students each year. The institution continues to grow as shown by the comparison numbers that follow.

Faculty

Students

FY2003 FY2002 FY2001

148

3,673

137

3,553

132

3,466

Overview of the Financial Statements and Financial Analysis

Albany State University is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets, the Statement of Revenues, Expenses, and Changes in Net Assets, and the Statement of Cash Flows. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2002 and FY 2003.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Albany State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements.

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's
Annual Financial Report FY 2003 (Version 1.0) 1

equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets

June 30, 2003
$6,573,678.73 111,069,626.96
352,618.01 117,995,923.70

June 30, 2002
$5,021,541.16 60,036,130.02
359,122.69 65,416,793.87

Lia b ilitie s : C urre nt Liabilities Noncurrent Liabilities Total Liabilities

5,086,857.39 824,702.50
5,911,559.89

3,546,447.50 3,546,447.50

Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonex pendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets

111,069,626.96
1,014,736.85 $112,084,363.81

59,996,963.39
347,816.20
1,525,566.78 $61,870,346.37

The total assets of the institution increased by $52,579,129.83. However, a review of the Statement of Net Assets will reveal that the increase was primarily due to an adjustment made in capital assets. See Note 1 in the notes to the financial statements for additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets. Many of the other asset categories, current and noncurrent, showed a decrease during the year. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution.
The total liabilities for the year increased by $2,365,112.39. The combination of the increase in total assets of $52,579,129.83 and the increase in total liabilities of $2,365,112.39 yields an increase in total net assets of $50,214,017.44. The increase in total net assets is primarily in the category of invested in capital assets.

Annual Financial Report FY 2003 (Version 1.0) 2

Statement of Revenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

Operating Revenues Operating Expenses Operating Loss
Nonoperating Revenues and Expenses

June 30, 2003
$39,460,127.48 65,821,834.22 (26,361,706.74)
21,597,044.80

June 30, 2002
$18,126,901.80 52,659,816.04 (34,532,914.24)
20,936,226.01

Income (Loss) Before other revenues, expenses, gains or losses

(4,764,661.94)

(13,596,688.23)

Other revenues, expenses, gains or losses

(333,544.80)

6,884,338.74

Increase in Net Assets

(5,098,206.74)

(6,712,349.49)

Net Assets at beginning of year, as originally reported C umulative effect of changes in accounting principle Prior Year Adjustments Net Assets at beginning of year, restated

61,870,346.37
55,312,224.18 117,182,570.55

102,134,314.54 33,551,618.68
68,582,695.86

Net Assets at End of Year

$112,084,363.81

$61,870,346.37

The Statement of Revenues, Expenses, and Changes in Net Assets reflects an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:

Annual Financial Report FY 2003 (Version 1.0) 3

Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

Operating Revenue Tuition and Fees Grants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O th e r
Total Operating Revenue
Nonoperating Revenue State Appropriations G ifts Investment Incom e G rants and C ontracts O th e r
Total Nonoperating Revenue
C apital Gifts and G rants State C apital Appropriations Other C apital G ifts and Grants
Total C apital G ifts and G rants
Total Revenues

June 30, 2003

June 30, 2002

$4,848,021.39 27,536,353.58
183,873.15 6,342,224.86
549,654.50
39,460,127.48

$4,769,873.12 6,478,284.23 112,987.35 6,687,016.37 78,740.73
18,126,901.80

21,560,291.89
36,752.91 (333,544.80)

20,837,256.70
103,704.45 6,884,338.74

21,263,500.00

27,825,299.89

0.00 $60,723,627.48

0.00 $45,952,201.69

Annual Financial Report FY 2003 (Version 1.0) 4

Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003 $19,216,796.86
658,410.31 3,393,624.33 2,444,588.18 9,440,312.19 7,133,474.56 16,484,049.10 7,050,578.69
65,821,834.22
$65,821,834.22

June 30, 2002
$17,436,513.60
608,675.01 3,065,689.44 2,296,577.58 7,965,988.80 6,967,743.89 8,870,336.25 5,448,291.47
52,659,816.04
4,735.14
$52,664,551.18

The compensation and employee benefits category increased by approximately $2,564,586.87. The increase reflects a pay raise for the employees of the institution of approximately three percent with the associated fringe benefits. The increase also reflects an increased cost of health insurance for the employees of the institution.
Utilities decreased by approximately ($81,522.49) during the past year. The decrease was primarily due to a renegotiated contract with the University's Energy Provider.
Under non-operating revenues (expenses) state appropriations increased by approximately $723,035.19. The increase is mainly attributable to the fact that MRRF funds were collected via GSFIC.
Statement of Cash Flows
The final statement is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from noncapital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from
Annual Financial Report FY 2003 (Version 1.0) 5

capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Year Ended June 30, 2003, Condensed

C ash Provided (used) By: Operating Activities Non-capital Financing Activities Investing Activities C apital and Related Financing Activities
Net C hange in C ash C ash, Beginning of Year
C ash, End of Year

June 30, 2003
($ 2 0 ,8 4 3 ,2 5 1 .0 4 ) 2 1 ,7 1 7 ,1 4 1 .2 8 3 6 ,7 5 2 .9 1 (3 2 1 ,7 9 8 .5 5 )
5 8 8 ,8 4 4 .6 0 (5 8 2 ,0 4 8 .0 2 )
$ 6 ,7 9 6 .5 8

Capital Assets
The University had no significant capital asset additions for facilities in fiscal year 2003. Projected funding for FY 2004 MRRF projects will be approximately $800,000. The funding will be provided by GSFIC.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Economic Outlook
The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong, even with a relatively flat funded year. The University anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues.
_____________________ Portia Holmes Shields President Albany State University

Annual Financial Report FY 2003 (Version 1.0) 6

Statement of Net Assets
ALBANY STATE UNIVERSITY STATEMENT OF NET ASSETS
June 30, 2003
ASSETS Current Assets C ash and C ash Equivalents S hort-term Investm ents A ccounts Receivable, net I n v e n to r ie s Othe r A ssets Total C urrent A ssets
Noncurrent Assets Noncurrent C ash Investm e nts Notes Receivable, net C apital A ssets, net Total Noncurrent A ssets TOTAL ASSETS
LIA BILIT IE S Current Liabilities A ccounts Payable and A ccrued Liabilities D eposits Deferred Revenue Othe r Liabilities D eposits Held for Other Organizations C om pensated A bsences (curre nt portion) Total C urrent Liabilities Noncurrent Liabilities C om pensated A bsences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES

June 30, 2003
$6,796.58 6,003,131.85
563,750.30 6,573,678.73
352,618.01 111,069,626.96 111,422,244.97 117,995,923.70
1,011,825.23 3,144,193.27
(42,752.42) 456,080.08 517,511.23 5,086,857.39 824,702.50 824,702.50 5,911,559.89

NET ASSETS Invested in C apital A ssets, net of related debt Restricted for No ne x p e n d a b le Ex p e nd a b le C apital Projects U n r e s tr ic te d TOTAL NET ASSETS

111,069,626.96
1,014,736.85 $112,084,363.81

Annual Financial Report FY 2003 (Version 1.0) 7

Statement of Revenues, Expenses and Changes in Net Assets

ALBANY STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2003
June 30, 2003

RE VE NU E S

Operating Revenues

Student Tuition and Fees

$8,632,533.32

Less: Sponsored and Unsponsored Scholarships

(3,784,511.93)

Federal Appropriations

Federal Grants and C ontracts

25,774,264.74

State and Local Grants and C ontracts

1,652,034.60

Nongovernmental Grants and C ontracts

110,054.24

Sales and Services of Educational Departments

183,873.15

Auxiliary Enterprises

6,342,224.86

Other Operating Revenues

549,654.50

Total Operating Revenues

39,460,127.48

E XPE NS E S

Operating Expenses

Salaries:

Fa c u lty S ta ff

10,560,734.65 13,554,904.30

B e ne fits Other Personal Services

6,894,240.08

Travel

253,000.71

Scholarships and Fellowships

16,870,836.08

Utilitie s

1,540,504.75

Supplies and Other Services D e p r e c ia tio n

12,103,204.14 4,044,409.51

Total Operating Expenses

65,821,834.22

Operating Income (loss) NONOPERATING REVENUES (EXPENSES)

(26,361,706.74)

State Appropriations

21,560,291.89

G ifts

Investment Income (endowments, auxiliary and other) Interest Expense (capital assets)

36,752.91

Other Nonoperating Revenues

Net Nonoperating Revenues

21,597,044.80

Income before other revenues, expenses, gains, or loss

(4,764,661.94)

State C apital Appropriations

C apital Grants and Gifts

Federal Grants & C ontracts

State Grants & C ontracts

Other Grants and C ontracts

(333,544.80)

Total Other Revenues

(333,544.80)

Increase in Net Assets NET ASSETS

(5,098,206.74)

Net Assets-beginning of year, as originally reported

61,870,346.37

C umulative effect of changes in accounting principle

Prior Year Adjustments

55,312,224.18

Net Assets-beginning of year, restated

117,182,570.55

Net Assets-End of Year

$112,084,363.81

Annual Financial Report FY 2003 (Version 1.0) 8

Statement of Cash Flows
ALBANY STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2003
CASH F LOWS F ROM OPERATING A CTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales and Services of Educational D epartments Paym ents to Suppliers Paym ents to Em ployees Paym ents for Scholarships and Fellowships Loans Issued to Students and Em ployees C ollection of Loans to Students and Em ployees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities
CASH F LOWS F ROM NON- CAPITA L F INANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities
CASH F LOWS F ROM CAPIT AL A ND RELA TED F INA NCING A CTIVITIES C apital G rants and G ifts Received Proceeds from sale of C apital A ssets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing A ctivities
CASH F LOWS F ROM INVESTING ACTIVIT IE S Proceeds from Sales and Maturities of Investments Interest on Investm ents Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003
$6,541,050.23
28,052,738.38 183,873.15
(16,960,884.10) (24,101,217.31) (20,655,348.01)
(29,198.00) 14,151.54
1,384,958.03 1,311,500.36 1,667,866.73
131,201.39 342,291.12 588,830.85 135,280.10 549,654.50 (20,843,251.04)
21,626,031.59 91,109.69
21,717,141.28
(321,798.55)
(321,798.55)
36,752.91
36,752.91 588,844.60 (582,048.02)
$6,796.58

Annual Financial Report FY 2003 (Version 1.0) 9

Statement of Cash Flows, Continued
RECONCILIATION OF OPERAT ING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (loss) A djustments to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating Activities
D epreciation C hange in Assets and Liabilities:
Receivables, net I n v e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated A bsences
Net C ash Provided (used) by Operating A ctivities

($26,361,706.74)
4,044,409.51
(844,534.96) 20,815.20 23,763.25 (91,155.08)
2,420,350.63 (81,919.05) 26,726.20
($20,843,251.04)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current Assets

$6,796.58 $6,796.58

Albany State University had no transactions to report under Non-Cash Investing, Non-Capital Financing, and Capital and Related-Financing Transactions.

Annual Financial Report FY 2003 (Version 1.0) 10

ALBANY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations Albany State University serves the state, and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity Albany State University is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Albany State University as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Albany State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Albany State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of
Annual Financial Report FY 2003 (Version 1.0) 11

materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
Basis of Accounting For financial reporting purposes, the University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-university transactions have been eliminated.
The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Consumable supplies are carried at the lower of cost or market on either the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis.
Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives
Annual Financial Report FY 2003 (Version 1.0) 12

of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Albany State University had accrued liability for compensated absences in the amount of 1,315,487.53 as of 7-1-2002. For FY2003, $580,044.96 was earned in compensated absences and employees were paid $553,318.76 for a net increase of $26,726.20. The ending balance as of 6-30-2003 in accrued liability for compensated absences is $1,342,213.73.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The University's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Annual Financial Report FY 2003 (Version 1.0) 13

Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.

Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.

Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.

Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus).

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Reserve Reserve for Encumbrances Reserve for Inventory O the r Unrestricted Total Unrestricted Ne t A ssets

June 30, 2003 $0.00
1,014,736.85 $1,014,736.85

When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes Albany State University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues The University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored
Annual Financial Report FY 2003 (Version 1.0) 14

scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships.
Annual Financial Report FY 2003 (Version 1.0) 15

Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus Albany State University) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Albany State University), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Annual Financial Report FY 2003 (Version 1.0) 16

Categorization of Deposits
The University's cash deposits are categorized by risk as follows:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the University or by its agent in the University's name.
Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University's name.
Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the University's name, and amounts uncollateralized.
Cash Deposits as of June 30, 2003

C ash Deposits Investment Portfolio Accounts
Total C ash Deposits

C arrying Amount
($54,408.22)

Bank Balances
$273,525.25

Risk C ategories

1

2

3

$100,000.00

$0.00 $173,525.25

($54,408.22)

$273,525.25

$100,000.00

$0.00 $173,525.25

Categorization of Investments
The University's investments are categorized as to credit risk within the three categories described below:
Category 1 - Insured or registered, or securities held by the University or its agent in the University's name
Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name.
Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University's name.
At June 30, 2003, the University had no investments.

Annual Financial Report FY 2003 (Version 1.0) 17

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2003.

June 30, 2003

S tudent Tuition and Fees A uxiliary Enterprises and Other Operating A ctivities Fede ral, S tate , and Private Funds O the r
Less A llowance for D oubtful A ccounts

$2,760,767.51 1,170,998.02 1,932,621.19 138,745.13 6,003,131.85

Net A ccounts Receivable

$6,003,131.85

Note 4. Inventories

Inventories consisted of the following at June 30, 2003.

B o o k s to r e Food S ervices Physical Plant O th e r
T o ta l

June 30, 2003 $539,976.47
23,773.83 $563,750.30

Note 5. Notes/Loans Receivable
Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2003 and 2002. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education.

Annual Financial Report FY 2003 (Version 1.0) 18

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2003.

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$1,715,432.85 12,011.00
1,727,443.85

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

64,288,040.38 8,694,815.00
11,372,598.88
5,397,793.55
89,753,247.81

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

14,972,433.83 3,845,610.59 8,428,831.22
4,197,686.00
31,444,561.64

Total Capital Assets, Being Depreciated, Net 58,308,686.17

Capital Assets, net

$60,036,130.02

Additions $1,080,348.00
1,080,348.00

Reductions
$0.00 12,011.00 12,011.00

Ending Balance 6/30/2003
$2,795,780.85 0.00
2,795,780.85

11,508,546.00 51,430,382.62
288,973.69
127,990.51 63,355,892.82

5,594,620.81 1,353.82
5,595,974.63

11,508,546.00 115,718,423.00
8,694,815.00 6,066,951.76
0.00 5,524,430.24
0.00 147,513,166.00

1,342,664.00 10,219,832.17
543,225.09
236,742.00 12,342,463.26 51,013,429.56 $52,093,777.56

4,547,705.01 4,547,705.01

1,342,664.00 25,192,266.00
4,388,835.68 3,881,126.21
0.00 4,434,428.00
0.00 39,239,319.89

1,048,269.62 108,273,846.11

$1,060,280.62 $111,069,626.96

Annual Financial Report FY 2003 (Version 1.0) 19

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2003.

Prepaid Tuition and Fees Research O ther D eferred Revenue
T o ta ls

June 30, 2003 $2,613,695.31
530,497.96 $3,144,193.27

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2003 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2002
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2003

$0.00

$0.00

Current Portion
$0.00

Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total

1,315,487.53 1,315,487.53

580,044.96 580,044.96

553,318.76 553,318.76

1,342,213.73 0.00
1,342,213.73

517,511.23 517,511.23

Total Long Term Obligations

$1,315,487.53 $580,044.96

$553,318.76 $1,342,213.73

$517,511.23

(a) The beginning balance includes the amount shown as current in FY2002 and reclassified as long-term in FY2003.

Note 9. Lease Obligations Albany State University had no leases as of June 30, 2003.

Annual Financial Report FY 2003 (Version 1.0) 20

Note 10. Retirement Plans

Teachers Retirement System Of Georgia

Plan Description Albany State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Albany State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Albany State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$1,506,085.83 $1,455,490.27 $1,761,216.25

Regents Retirement Plan

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.

Funding Policy Albany State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statue and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation. Employees contribute 5% of their
Annual Financial Report FY 2003 (Version 1.0) 21

earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times.
Albany State University and the covered employees made the required contributions of $ 485,471.79 (10.02%) and $ 248,625.99 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description Albany State University participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $ 43,847.84 which represents 7.5 % of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
Albany State University is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Albany State University and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue
Annual Financial Report FY 2003 (Version 1.0) 22

Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Albany State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Albany State University expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Albany State University (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
Note 13. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University
Annual Financial Report FY 2003 (Version 1.0) 23

System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 157 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, Albany State University recognized as incurred $ 489,026.68 of expenditures, which was net of $ 194,297.56 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 24

Note 14. Natural Classifications With Functional Classifications The University's operating expenses by functional classification for FY2003 are shown below:

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003
Functional Classification FY2003

Natural Classification

Instruction

Research

Public Service

Academic Support

Faculty Staff B enefit s Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation

$ 10,222,080.94 3,003,680.85 3,055,136.59
107,763.19
223,762.54 2,596,529.99
7,842.76

$0.00

$ 26,480.00 235,192.40
41,253.69
2,459.51 30,650.00
731.65 321,643.06

$ 82,015.80 1,800,848.46
515,867.29
17,571.06
26,838.82 713,207.90 237,275.00

Total Expenses

$ 19,216,796.86

$0.00

$ 658,410.31

$ 3,393,624.33

Student Services
$ 200.00 1,345,775.74
362,758.99
33,565.10 30,960.00 37,835.57 633,464.65
28.13
$ 2,444,588.18

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003

Natural Classification

Institutional Support

Plant Operations & M aintenance

Functional Classification FY2003

Scholarships & Fellowships

Auxiliary Enterprises

Unallocated Expenses

Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation

$138,457.91 4,626,833.27
2,159,117.99
59,642.58 103,833.00 112,532.85 2,239,515.46
379.13

$0.00 1,774,460.86
535,380.36 (675,290.76)
1,754.99
1,014,924.82 726,064.76 3,756,179.53

$91,500.00 20,804.38 35,828.77
80.64 16,075,740.99
260,094.32

$0.00 747,308.34 188,896.40 675,290.76
30,163.64 629,652.09 123,878.50 4,612,684.00
42,704.96

$0.00

Total Expenses

$9,440,312.19

$7,133,474.56

$16,484,049.10

$7,050,578.69

$0.00

Total Expenses
$10,560,734.65 13,554,904.30 6,894,240.08 0.00 253,000.71 16,870,836.08 1,540,504.75 12,103,204.14 4,044,409.51
$65,821,834.22

Annual Financial Report FY 2003 (Version 1.0) 25

ARMSTRONG ATLANTIC STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2003

Armstrong Atlantic State University Savannah, Georgia

Thomas Z. Jones
President

James M. Brignati
Vice President for Business and Finance

ARMSTRONG ATLANTIC STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2003
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 8 Statement of Revenues, Expenses and Changes in Net Assets............................................ 9 Statement of Cash Flows ................................................................................................... 10 Note 1 Summary of Significant Accounting Policies ...................................................... 12 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 17 Note 3 Accounts Receivable............................................................................................. 19 Note 4 Inventories............................................................................................................. 19 Note 5 Notes/Loans Receivable........................................................................................ 19 Note 6 Capital Assets........................................................................................................ 20 Note 7 Deferred Revenue.................................................................................................. 20 Note 8 Long-Term Liabilities ........................................................................................... 21 Note 9 Lease Obligations.................................................................................................. 21 Note 10 Retirement Plans ................................................................................................. 22 Note 11 Risk Management................................................................................................ 23 Note 12 Contingencies...................................................................................................... 24 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 24 Note 14 Natural Classifications With Functional Classifications..................................... 26

ARMSTRONG ATLANTIC STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Armstrong Atlantic State University is one of the 34 institutions of the University System of Georgia. The University, located in Savannah, Georgia, was founded in 1935 and has become known for its health professions, education, technology, and liberal arts programs. The University offers baccalaureate and masters degrees in a wide variety of subjects. This wide range of educational opportunities attracts a highly qualified faculty and a student body of more than 6,000 students. The institution continues to grow as shown by the comparison numbers that follow.

Faculty

Students

FY2003 FY2002 FY2001

189

6,026

186

5,668

193

5,444

Overview of the Financial Statements and Financial Analysis

Armstrong Atlantic State University is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets, the Statement of Revenues, Expenses, Changes in Net Assets, and the Statement of Cash Flows. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY2002 and FY2003.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Armstrong Atlantic State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and noncurrent), and Net Assets (Assets minus Liabilities). The difference between current and noncurrent assets will be discussed in the footnotes to the financial statements.

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors, investors, and lending institutions.
Annual Financial Report FY 2003 (Version 1.0) 1

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets

June 30, 2003
$8,930,867.31 48,897,900.94
3,602.42 57,832,370.67

June 30, 2002
$5,196,740.83 53,895,300.68
6,235.00 59,098,276.51

Lia b ilitie s : C urre nt Liabilities Noncurre nt Liabilities Total Liabilitie s

4,328,238.35 466,969.64
4,795,207.99

3,149,730.46 1,116,031.42 4,265,761.88

Net A ssets:

Invested in C apital A ssets, net of debt 48,897,900.94

Restricted - nonexpendable

1,926,081.88

Restricted - expendable

96,523.57

C apital Projects

U n r e s tr ic te d

2,116,656.29

Total Net A ssets

$53,037,162.68

53,895,300.68 891,227.79 45,986.16
(1,661,338.94) 1,661,338.94 $54,832,514.63

The total assets of the institution decreased by $1,265,905.84. However, a review of the Statement of Net Assets will reveal that the decrease was primarily due to a restatement of capital assets for FY 2002. See Note 1 in the notes to the financial statements for additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution.
The total liabilities for the year increased by $529,446.11. The primary cause for the increase was in current liabilities. The combination of the decrease in total assets of ($1,265,905.84) and the increase in total liabilities of $529,446.11 yields a decrease in total net assets of ($1,795,351.95). The decrease in total net assets is primarily in the category of capital assets.
Annual Financial Report FY 2003 (Version 1.0) 2

Statement of Revenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30, 2003

Operating Revenues Operating Expenses Operating Loss

$23,827,217.34 58,011,495.11 (34,184,277.77)

Nonoperating Revenues and Expenses

25,708,665.09

Income (Loss) Before other revenues, expenses, gains or losses

(8,475,612.68)

Other revenues, expenses, gains or losses

4,390,671.71

Increase in Net Assets

(4,084,940.97)

Net Assets at beginning of year, as originally reported C umulative effect of changes in accounting principle Prior Year Adjustments Net Assets at beginning of year, restated

54,832,514.63
2,289,589.02 57,122,103.65

Net Assets at End of Year

$53,037,162.68

June 30, 2002 $24,355,168.60
50,082,241.10 (25,727,072.50) 27,374,854.08
1,647,781.58 258,253.82
1,906,035.40 76,340,376.95 23,413,897.72 52,926,479.23 $54,832,514.63

Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:

Annual Financial Report FY 2003 (Version 1.0) 3

Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

Operating Revenue Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Auxiliary Other
Total Operating Revenue
Nonoperating Revenue State Appropriations Gifts Investment Income Grants and Contracts Other
Total Nonoperating Revenue
Capital Gifts and Grants State Capital Appropriations Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

June 30, 2003

June 30, 2002

$11,206,443.35 6,601,901.89 1,380,001.85 4,000,924.23 637,946.02
23,827,217.34

$8,490,808.42 9,603,068.51 1,390,099.01 4,155,209.52 715,983.14
24,355,168.60

25,482,429.23 181,398.00 88,183.33
(43,345.47)
25,708,665.09

27,214,424.00 160,430.08
27,374,854.08

4,390,671.71
4,390,671.71 $53,926,554.14

258,253.82 258,253.82 $51,988,276.50

Annual Financial Report FY 2003 (Version 1.0) 4

Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003
$21,399,487.34 84.50
1,156,049.69 5,294,793.32 2,846,132.90 6,240,085.29 3,503,201.81 8,306,541.44 3,451,822.30 5,813,296.52
58,011,495.11
$58,011,495.11

June 30, 2002 $20,071,822.38
1,348,797.19 5,076,367.95 2,641,196.86 5,137,310.24 3,335,076.40 8,062,050.12 4,409,619.96
50,082,241.10
$50,082,241.10

During the year residential life eliminated some food service stores and eliminated some of the institutionally contracted housing. However, at the same time, residential life constructed nearly 300 beds of new housing on the campus using a third party developer in a construction and leasing relationship. The net effect to the campus is that the students actually have more oncampus residential life availability. The new construction of residential life units on the campus, due to the third party relationship with the privatized vendor, does not show on the University's financial statements due to the activity being an off-balance sheet activity for financial reporting purposes. Since the University does not own or lease these units, the revenue or expenses are also not reflected in the University's financial statements. An outside firm is managing these units for the owner, and receives a fee for its services.
Utilities increased by approximately $75,094.02 during the past year. The increase was primarily associated with the increased square footage added.

Annual Financial Report FY 2003 (Version 1.0) 5

Statement of Cash Flows

The final statement presented by the Armstrong Atlantic State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Year Ended June 30, 2003, Condensed

C ash Provided (used) By: Operating A ctivities Non-capital Financing Activities Investing Activities C apital and Related Financing A ctivities
Net C hange in C ash C ash, Beginning of Year
C ash, End of Year

June 30, 2003
($ 2 8 ,0 3 7 ,0 0 2 .1 8 ) 2 7 ,6 2 0 ,8 0 0 .3 8 8 8 ,1 8 3 .3 3 3 ,1 5 3 ,6 4 2 .5 0
2 ,8 2 5 ,6 2 4 .0 3 2 ,5 9 2 ,8 5 1 .4 7
$ 5 ,4 1 8 ,4 7 5 .5 0

Capital Assets
Armstrong Atlantic State University completed major renovations to the Solms/Hawes Halls in FY2003. The $4,782,653.83 for this project was funded by the Georgia State Finance and Investment Commission (GSFIC). Other renovations funded by the GSFIC included $850,000 for equipment.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Annual Financial Report FY 2003 (Version 1.0) 6

Economic Outlook The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of significant business operations. The University's overall financial position is strong. Even with significant budget cuts this year, the University was able to continue its mission with the help of enrollment increases. The University anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues. _________________________ Thomas Z. Jones, President Armstrong Atlantic State University
Annual Financial Report FY 2003 (Version 1.0) 7

Statement of Net Assets

A RM S TRO N G A TL A N TIC S TA TE U N IV E RS ITY

STA TE M E NT O F NE T A SSE TS

June 30, 2003

June 30, 2003

ASSETS

Cu rre n t A sse ts

C a s h a n d C a s h E q u iv a le n ts

$ 5 ,4 1 8 ,4 7 5 .5 0

S h o rt-te rm In v e s tm e n ts

A c c o u n ts R e c e iv a b le , n e t

3 ,0 3 1 ,6 5 6 .9 3

In v e n to rie s

4 5 8 ,1 0 2 .2 5

O th e r A s s e ts

2 2 ,6 3 2 .6 3

T o ta l C u rre n t A s s e ts

8 ,9 3 0 ,8 6 7 .3 1

No ncurre nt A sse ts Noncurrent C ash In v e s tm e n ts N o te s R e c e iv a b le , n e t C a p ita l A s s e ts , n e t T o ta l N o n c u rre n t A s s e ts TOTAL ASSETS

3 ,6 0 2 .4 2 4 8 ,8 9 7 ,9 0 0 .9 4 4 8 ,9 0 1 ,5 0 3 .3 6 5 7 ,8 3 2 ,3 7 0 .6 7

LIA BILIT IE S Cu rre n t Lia b ilitie s
A c c o u n ts P a y a b le a n d A c c ru e d Lia b ilitie s D e p o s its D e fe rre d R e v e nue O th e r Lia b ilitie s D e p o s its H e ld fo r O th e r O rg a n iz a tio n s C o m p e n s a te d A b s e n c e s (c u rre n t p o rtio n )
T o ta l C u rre n t Lia b ilitie s No n c u rre n t Lia b ilitie s
C o m p e n s a te d A b s e n c e s Lo n g -te rm Lia b ilitie s
T o ta l N o n c u rre n t Lia b ilitie s T OT A L LIA BILITIE S

7 0 4 ,1 9 8 .3 5
2 ,2 9 0 ,3 8 4 .0 8 6 0 ,2 5 3 .6 0
4 5 3 ,6 0 1 .1 6 8 1 9 ,8 0 1 .1 6 4 ,3 2 8 ,2 3 8 .3 5
4 6 6 ,9 6 9 .6 4
4 6 6 ,9 6 9 .6 4 4 ,7 9 5 ,2 0 7 .9 9

NET ASSETS In v e s te d in C a p ita l A s s e ts , n e t o f re la te d d e b t R e s tric te d fo r N o n e x p e n d a b le E x p e n d a b le C a p ita l P ro je c ts U n re s tric te d TOTAL NET ASSETS

4 8 ,8 9 7 ,9 0 0 .9 4
1 ,9 2 6 ,0 8 1 .8 8 9 6 ,5 2 3 .5 7
2 ,1 1 6 ,6 5 6 .2 9 $ 5 3 ,0 3 7 ,1 6 2 .6 8

Annual Financial Report FY 2003 (Version 1.0) 8

Statement of Revenues, Expenses and Changes in Net Assets

ARMSTRONG ATLANTIC STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2003
June 30, 2003

REVENUES

Operating Revenues

Student Tuition and Fees

$12,762,114.96

Less: Sponsored and Unsponsored Scholarships

(1,555,671.61)

Federal Appropriations

Federal Grants and Contracts

5,354,558.56

State and Local Grants and Contracts

443,886.87

Nongovernmental Grants and Contracts Sales and Services of Educational Departments Auxiliary Enterprises

803,456.46 1,380,001.85 4,000,924.23

Other Operating Revenues

637,946.02

Total Operating Revenues

23,827,217.34

EXPENSES

Operating Expenses

Salaries:

Faculty Staff

13,684,518.38 12,312,617.93

Benefits Other Personal Services

6,915,367.60 40.63

Travel

500,198.42

Scholarships and Fellowships

8,988,512.28

Utilities

1,977,601.74

Supplies and Other Services Depreciation

12,116,109.78 1,516,528.35

Total Operating Expenses

58,011,495.11

Operating Income (loss) NONOPERATING REVENUES (EXPENSES)

(34,184,277.77)

State Appropriations

25,482,429.23

Gifts

181,398.00

Investment Income (endowments, auxiliary and other) Interest Expense (capital assets)

88,183.33

Other Nonoperating Revenues

(43,345.47)

Net Nonoperating Revenues

25,708,665.09

Income before other revenues, expenses, gains, or loss

(8,475,612.68)

State Capital Appropriations Capital Grants and Gifts Federal Grants & Contracts

4,390,671.71

State Grants & Contracts

Other Grants and Contracts

Total Other Revenues

4,390,671.71

Increase in Net Assets NET ASSETS

(4,084,940.97)

Net Assets-beginning of year, as originally reported

54,832,514.63

Cumulative effect of changes in accounting principle

Prior Year Adjustments

2,289,589.02

Net Assets-beginning of year, restated

57,122,103.65

Net Assets-End of Year

$53,037,162.68

Annual Financial Report FY 2003 (Version 1.0) 9

Statement of Cash Flows
ARMSTRONG ATLANTIC STATE UNIVERSITY STATEMENT OF CASH FLOWS
For the Year Ended June 30, 2003
CASH F LOWS F ROM OPE RATING A CTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales and Services of Educational D epartments Paym ents to Suppliers Paym ents to Em ployees Paym ents for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Em ployees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities
CASH F LOWS F ROM NON- CAPITA L F INANCING ACTIVIT IE S State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities
CASH F LOWS F ROM CAPIT AL AND RELATED F INANCING A CTIVITIES C apital Grants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities
CASH F LOWS F ROM INVESTING ACT IVITIES Proceeds from Sales and Maturities of Investm ents Interest on Investm ents Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003
$12,970,037.65
6,696,723.27 1,389,585.51 (18,599,038.69) (25,917,761.08) (8,988,512.28)
(659.54) 3,292.12
1,839.51 2,297,654.37
20,519.99 28,276.88
1,611,527.22 46,140.02
403,372.87 (28,037,002.18)
25,483,034.60 1,956,367.78 181,398.00
27,620,800.38
4,390,671.71
(1,190,301.79) (46,727.42)
3,153,642.50
88,183.33
88,183.33 2,825,624.03 2,592,851.47 $5,418,475.50

Annual Financial Report FY 2003 (Version 1.0) 10

Statement of Cash Flows, Continued
RECONCILIATION OF OPERA TING LOSS TO NET CASH PROVIDE D (USED) BY OPERATING A CTIVITIES:
Operating Incom e (loss) A djustments to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating Activities
D epreciation C hange in Assets and Liabilities:
Receivables, net I n v e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($34,184,277.77)
1,516,528.35
(289,175.56) (57,901.52)
4,368,171.71 (114,668.70) 416,580.35 137,001.58 170,739.38
($28,037,002.18)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current A ssets

$5,418,475.50 $5,418,475.50

Armstrong Atlantic State University had no transactions to report under Non-Cash Investing, Non-Capital Financing, and Capital and Related-Financing Transactions.

Annual Financial Report FY 2003 (Version 1.0) 11

ARMSTRONG ATLANTIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations Armstrong Atlantic State University serves the local, state, and national communities by providing its students with academic instruction that advances fundamental knowledge and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity Armstrong Atlantic State University is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Armstrong Atlantic State University as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Armstrong Atlantic State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Armstrong Atlantic State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of
Annual Financial Report FY 2003 (Version 1.0) 12

materiality, institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
Basis of Accounting For financial reporting purposes, the University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-university transactions have been eliminated.
The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Consumable supplies are carried at the lower of cost or market on either the first-in, first-out ("FIFO") basis. Resale inventories are valued at cost using the average-cost basis.
Annual Financial Report FY 2003 (Version 1.0) 13

Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Armstrong Atlantic State University when complete. For the year ended June 30, 2003, GSFIC transferred capital additions valued at $4,782,653.83 to Armstrong Atlantic State University.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Armstrong Atlantic State University had accrued liability for compensated absences in the amount of $1,116,031.41 as of 7-1-2002. For FY2003, $906,452.76 was earned in compensated absences and employees were paid $735,713.38, for a
Annual Financial Report FY 2003 (Version 1.0) 14

net increase of $170,739.38. The ending balance as of 6-30-2003 in accrued liability for compensated absences is $1,286,770.79.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The University's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.
Annual Financial Report FY 2003 (Version 1.0) 15

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Reserve Reserve for Encumbrances Reserve for Inventory O ther Unrestricted Total Unre stricted Net A ssets

June 30, 2003
$543,044.82 988,377.06 74,234.72 510,999.69
$2,116,656.29

When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.

Income Taxes Armstrong Atlantic State University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.

Classification of Revenues The University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:

Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.

Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.

Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships.

Annual Financial Report FY 2003 (Version 1.0) 16

Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus Armstrong Atlantic State University) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus Armstrong Atlantic State University), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Annual Financial Report FY 2003 (Version 1.0) 17

Categorization of Deposits
The University's cash deposits are categorized by risk as follows:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the University or by its agent in the University's name.
Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University's name.
Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the University's name, and amounts uncollateralized.
Cash Deposits as of June 30, 2003

Cash Deposits Investment Portfolio Accounts
Total Cash Deposits

Carrying Amount

Bank Balances

$5,418,475.50

$4,378,922.08

$5,418,475.50

$4,378,922.08

Risk Categories

1

2

$200,254.88

$200,000.00

3 $3,978,667.20

$200,254.88

$200,000.00 $3,978,667.20

Categorization of Investments
The University's investments are categorized as to credit risk within the three categories described below:
Category 1 - Insured or registered, or securities held by the University or its agent in the University's name
Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name.
Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University's name.
At June 30, 2003, the University had no investments.

Annual Financial Report FY 2003 (Version 1.0) 18

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2003.

June 30, 2003

S tudent Tuition and Fees A uxiliary Enterprises and Other Operating A ctivities Fede ral, S tate , and Private Funds O the r
Less A llowance for D oubtful A ccounts

$155,708.36 585,117.78
2,173,975.39 118,045.93
3,032,847.46 1,190.53

Net A ccounts Receivable

$3,031,656.93

Note 4. Inventories

Inventories consisted of the following at June 30, 2003.

B o o k s to r e Food S ervices Physical Plant O th e r
T o ta l

June 30, 2003 $398,740.94
59,361.31 $458,102.25

Note 5. Notes/Loans Receivable
Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2003 and 2002. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The University has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2003 the allowance for uncollectible loans was approximately $4,479.00.

Annual Financial Report FY 2003 (Version 1.0) 19

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2003.

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$258,253.82
258,253.82

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

1,147,460.00 52,943,476.86
1,560,820.00 5,060,014.03
16,396,590.00 10,500.00
77,118,860.89

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

961,878.17 12,046,146.56
1,437,699.48 3,316,343.32
5,717,909.00 1,837.50
23,481,814.03

Total Capital Assets, Being Depreciated, Net 53,637,046.86

Capital Assets, net

$53,895,300.68

Additions $0.00 0.00

Reductions $0.00 0.00

Ending Balance 6/30/2003
$258,253.82 0.00
258,253.82

4,394,521.71 68,478.69
8,310,485.68 12,773,486.08

94,508.85 16,443,858.00 16,538,366.85

1,147,460.00 57,337,998.57
1,560,820.00 5,033,983.87
0.00 8,263,217.68
10,500.00 73,353,980.12

27,355.13 1,541,552.29
28,357.88 535,777.02
7,257,299.62 262.50
9,390,604.44
3,382,881.64
$3,382,881.64

96,187.82 1,238,308.42
143,769.95 26,493.66
6,653,325.62
8,158,085.47
8,380,281.38
$8,380,281.38

893,045.48 12,349,390.43
1,322,287.41 3,825,626.68
0.00 6,321,883.00
2,100.00 24,714,333.00
48,639,647.12
$48,897,900.94

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2003

Prepaid Tuition and Fees Research O ther D eferred Revenue
T o ta ls

June 30, 2003 $2,290,384.08
$2,290,384.08

Annual Financial Report FY 2003 (Version 1.0) 20

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2003 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total
Total Long Term Obligations

Beginning Balance July 1, 2002
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2003

$0.00

$0.00

1,116,031.42

906,452.76

1,116,031.42

906,452.76

$1,116,031.42 $906,452.76

735,713.38 1,286,770.80 735,713.38 1,286,770.80 $735,713.38 $1,286,770.80

Current Portion
$0.00
819,801.16 0.00
819,801.16
$819,801.16

(a) The beginning balance includes the amount shown as current in FY2002 and reclassified as long-term in FY2003.

Note 9. Lease Obligations

Armstrong Atlantic State University had no leases as of June 30, 2003.

Annual Financial Report FY 2003 (Version 1.0) 21

Note 10. Retirement Plans

Teachers Retirement System Of Georgia

Plan Description Armstrong Atlantic State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Armstrong Atlantic State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Armstrong Atlantic State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$1,234,346.11 $1,240,640.63 $1,634,389.68

Regents Retirement Plan

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.

Funding Policy Armstrong Atlantic State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statue and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation.

Annual Financial Report FY 2003 (Version 1.0) 22

Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.
Armstrong Atlantic State University and the covered employees made the required contributions of $973,753.54 (10.02%) and $485,907.09 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description Armstrong Atlantic State University participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $67,233.63 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
Armstrong Atlantic State University is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Armstrong Atlantic State University and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per
Annual Financial Report FY 2003 (Version 1.0) 23

person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Armstrong Atlantic State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Armstrong Atlantic State University expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Armstrong Atlantic State University (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
Note 13. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the
Annual Financial Report FY 2003 (Version 1.0) 24

group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 131 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, Armstrong Atlantic State University recognized as incurred $446,684.93 of expenditures, which was net of $191,806.23 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 25

Note 14. Natural Classifications With Functional Classifications The University's operating expenses by functional classification for FY2003 are shown below:

Statement of Operating Expenses - Natural vs Func tional Classific ations For the Fisc al Year Ended June 30, 2003
Func tional Classific ation F Y 2003

Natural C lassification

Instruction

Research

Public Service

Academic Support

Faculty Staff B enefits P erso nal Services Travel Scho larships and Fello wships Utilities Supplies and Others Services Depreciatio n

$ 13,435,010.20 2,217,977.60 3,595,881.86
174,540.30 48,121.00
170,043.06 1,688,062.73
69,850.59

$ 0.00 84.50

$ 143,234.56 492,727.34 125,059.29
23,709.11 21,931.65 7,078.50 339,239.02 3,070.22

$ 109,265.70 3,407,274.99
804,554.71
67,108.98
212,889.79 644,241.30 49,457.85

To tal Expenses

$ 21,399,487.34

$ 84.50

$ 1,156,049.69

$ 5,294,793.32

Student Services
$ 8,307.00 1,750,027.14
414,881.29
20,669.01 21,774.50 52,474.76 577,999.20
$ 2,846,132.90

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003

Natural Classification

Inst itutio nal Suppo rt

Functional Classification FY2003

P lant

Operat io ns

Scho larships

Auxiliary

& M aintenance

& Fellowships

Enterprises

Unallocated Expenses

To tal Expenses

Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciatio n

($ 15,704.08) 3,273,660.60 1,638,529.50
40.63 49,038.35
69,507.14 1,216,918.14
8,095.01

$0.00 619,109.61 196,321.61
217.16
1,459,554.57 2,679,727.90 (1,451,729.04)

$ 0.00 8,306,541.44

$ 4,405.00 551,840.65 140,139.34
164,915.51 590,143.69
6,053.92 1,973,686.99
20,637.20

$ 0.00
2,996,150.00 2,817,146.52

$13,684,518.38 12,312,617.93 6,915,367.60 40.63 500,198.42 8,988,512.28 1,977,601.74 12,116,109.78 1,516,528.35

Total Expenses

$6,240,085.29

$ 3,503,201.81

$8,306,541.44

$ 3,451,822.30

$5,813,296.52

$ 58,011,495.11

Annual Financial Report FY 2003 (Version 1.0) 26

ATLANTA METROPOLITAN COLLEGE
Financial Report
For the Year Ended June 30, 2003

Harold E. Wade President

Atlanta Metropolitan College Atlanta, Georgia
Freddie L. Johnson Vice President for Fiscal Affairs

ATLANTA METROPOLITAN COLLEGE ANNUAL FINANCIAL REPORT FY 2003
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 7 Statement of Revenues, Expenses and Changes in Net Assets............................................ 8 Statement of Cash Flows ..................................................................................................... 9 Note 1 Summary of Significant Accounting Policies ...................................................... 11 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 16 Note 3 Accounts Receivable............................................................................................. 17 Note 4 Inventories............................................................................................................. 18 Note 5 Notes/Loans Receivable......................................................................................... 18 Note 6 Capital Assets........................................................................................................ 19 Note 7 Deferred Revenue.................................................................................................. 20 Note 8 Long-Term Liabilities ........................................................................................... 20 Note 9 Lease Obligations................................................................................................... 19 Note 10 Retirement Plans ................................................................................................. 20 Note 11 Risk Management................................................................................................ 22 Note 12 Contingencies...................................................................................................... 23 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 23 Note 14 Natural Classifications With Functional Classifications..................................... 25

ATLANTA METROPOLITAN COLLEGE
Management's Discussion and Analysis

Introduction

Atlanta Metropolitan College is one of the 34 institutions of the University System of Georgia. The College was founded in 1974 and is located in the southwest quadrant of Atlanta, Georgia. The College among its many attributes has become known for its commitment to a high-quality general education program which supports a variety of well chosen associate degree and certificate programs and learning support programs designed to ensure access and opportunity for a diverse student group at an affordable cost. This variety of educational programs attracts a highly qualified faculty and a student body of approximately 1950 students per semester. The faculty and student enrollment count for each of the last three successive fall semesters shows the following pattern.

Faculty

Students

FY2003 FY2002 FY2001

92

1,995

85

1,940

94

1,901

Overview of the Financial Statements and Financial Analysis

Atlanta Metropolitan College is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2002 and FY 2003.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Atlanta Metropolitan College. The Statement of Net Assets presents end-ofyear data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements.

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.
Annual Financial Report FY 2003 (Version 1.0) 1

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is expendable restricted net assets. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets

June 30, 2003
$1,753,435.01 12,682,640.96
14,436,075.97

June 30, 2002
$3,207,066.59 12,341,972.46
15,549,039.05

Lia b ilitie s : C urre nt Liabilities Noncurre nt Liabilities Total Liabilitie s

1,368,805.36 286,046.94
1,654,852.30

2,267,227.63 2,267,227.63

Net A ssets:

Invested in C apital A ssets, net of debt 12,682,640.96

Restricted - nonexpendable

Restricted - expendable

(932.00)

C apital Projects

U n r e s tr ic te d

99,514.71

Total Net A ssets

$12,781,223.67

12,341,972.46
36,549.60
903,289.36 $13,281,811.42

The total assets of the institution decreased by ($1,112,963.08). A review of the Statement of Net Assets reveals that the decrease was primarily due to a decrease of $(1,046,333.79) in cash and cash equivalents. This decrease in cash was primarily attributable to the reductions in accounts payable as payments to vendors were made in a timelier manner during the year. The decrease in accounts receivable of $(321,674.47) was due in part to improved collections and an increase in the allowance for doubtful accounts. This decrease was offset by an increase of $340,668.50 in investment in plant, net of accumulated depreciation. See Note 1 in the notes to the financial statements for additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the mission of the institution.
The total liabilities for the year decreased by ($612,375.33). The primary reason for the decrease was in current liabilities, primarily $ (743,545.35) in accounts payable and accrued liabilities.
Annual Financial Report FY 2003 (Version 1.0) 2

The combination of the decrease in total assets of ($1,112,963.08) and the decrease in total liabilities of ($612,375.33) yields a decrease in total net assets of ($500,587.75). The decrease in total net assets is primarily in the category of unrestricted net assets.

Statement of Revenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking, operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30, 2003

Operating Revenues Operating Expenses Operating Loss

$7,096,249.33 16,127,181.53 (9,030,932.20)

Nonoperating Revenues and Expenses

8,145,185.72

Incom e (Loss) B efore other revenues, expenses, gains or losses

(885,746.48)

Other revenues, expenses, gains or losses

Increase in Net Assets

(885,746.48)

Net Assets at beginning of year, as originally reported C um ulative effect of changes in accounting principle Prior Year Adjustm ents Net Assets at beginning of year, restated

13,281,811.42
385,158.73 13,666,970.15

Net Assets at End of Year

$12,781,223.67

June 30, 2002 $7,104,203.09 16,213,368.29 (9,109,165.20)
9,282,635.30
173,470.10
173,470.10 27,054,000.61 13,945,659.29 13,108,341.32 $13,281,811.42

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a decrease in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:
Annual Financial Report FY 2003 (Version 1.0) 3

Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

Operating Revenue Tuition and Fees G rants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O th e r
Total Operating Revenue
Nonoperating Revenue State Appropriations G ifts Investment Incom e Grants and C ontracts O th e r
Total Nonoperating Revenue
C apital Gifts and G rants State C apital Appropriations Other C apital G ifts and Grants
Total C apital G ifts and G rants
Total Revenues

June 30, 2003

June 30, 2002

$2,385,587.48 3,471,795.87 74,567.90 999,126.97 165,171.11
7,096,249.33

$2,358,872.41 3,578,104.62 68,077.35 928,980.86 170,167.85
7,104,203.09

8,106,538.82 124.24
38,522.66

9,227,268.00 1,000.00
54,367.30

8,145,185.72

9,282,635.30

0.00 $15,241,435.05

0.00 $16,386,838.39

Annual Financial Report FY 2003 (Version 1.0) 4

Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003 $5,017,421.52
768,121.35 838,939.12 1,650,075.32 3,412,747.13 1,989,092.23 1,439,851.36 1,010,933.50
16,127,181.53
$16,127,181.53

June 30, 2002 $5,415,552.83
581,441.71 902,970.87 1,620,165.14 3,123,714.10 1,962,477.95 1,626,676.40 980,369.29
16,213,368.29
$16,213,368.29

Under non-operating revenues state appropriations decreased by $(1,120,729.18). This was due to reductions made by the Board of Regents given the current economic climate. This was the major contributor to the overall decrease in net assets given that the expenditures of the College remained reasonably consistent from year to year. Cost containment measures have been put in place to reduce further drain on the reserves of the College.
Statement of Cash Flows
The final statement presented by the College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Annual Financial Report FY 2003 (Version 1.0) 5

Cash Flows for the Year Ended June 30, 2003 Condensed

C ash Provided (used) By: Operating Activities Non-capital Financing Activities Investing Activities C apital and Related Financing Activities
Net C hange in C ash C ash, Beginning of Year C ash, End of Year

June 30, 2003
($ 8 ,8 9 1 ,9 2 9 .3 0 ) 8 ,0 8 3 ,9 0 7 .9 5 3 8 ,5 5 2 .6 6 (2 7 6 ,8 6 5 .1 0 ) (1 ,0 4 6 ,3 3 3 .7 9 ) 2 ,1 1 2 ,6 2 3 .7 3
$ 1 ,0 6 6 ,2 8 9 .9 4

Capital Assets
The College had no significant capital asset additions for facilities during the fiscal year ended June 30, 2003. For additional information concerning Capital Assets, see Notes 1 and 5 in the notes to the financial statements.
Economic Outlook
The College, like all state agencies, has been instructed to cut budgets by 2.5% and 5% for fiscal years 2004 and 2005 respectively. These reductions will certainly force the College to implement drastic cost containment measures. The cost containment measures will take the form of elimination, consolidation and/or reduction of certain programs, elimination and/or suspension of certain positions and the adoption of more stringent spending policies and controls. It is the hope of the College that the economic picture will reverse itself because further reductions will threaten its financial stability and force it to rethink its ability to fulfill its purpose. In light of the dim economic picture, the College is committed to weathering the storm to continue to provide a quality education to its students and community.

______________________ Harold E. Wade, President Atlanta Metropolitan College

Annual Financial Report FY 2003 (Version 1.0) 6

Statement of Net Assets

ATLANTA METROPOLITAN C OLLEGE STATEMENT OF NET ASSETS June 30, 2003
ASSETS Current Assets C ash and C ash Equivalents S hort-term Investm ents A ccounts Receivable, net I n v e n to r ie s Othe r A ssets Total C urrent A ssets

June 30, 2003
$1,066,289.94
484,385.93 194,123.90
8,635.24 1,753,435.01

Noncurrent Assets Noncurrent C ash Investm ents Notes Receivable, net C apital A ssets, net Total Noncurrent A ssets TOTAL ASSETS

12,682,640.96 12,682,640.96 14,436,075.97

LIA BILIT IE S Current Liabilities
A ccounts Payable and A ccrued Liabilities D eposits Deferred Revenue Othe r Liabilities D eposits He ld for Other Organizations C om pensated A bsences (current portion)
Total C urrent Liabilities Noncurrent Liabilities
C om pensated A bsences Long-term Liabilities
Total Noncurrent Liabilities TOTAL LIABILITIES

681,876.40
80,624.68 57,862.63 257,343.37 291,098.28 1,368,805.36
211,954.52 74,092.42
286,046.94 1,654,852.30

NET ASSETS Invested in C apital A ssets, net of related debt Restricted for No ne x p e nd a b le Ex p e nd a b le C apital Projects U n r e s tr ic te d TOTAL NET ASSETS

12,682,640.96
(932.00) 99,514.71 $12,781,223.67

Annual Financial Report FY 2003 (Version 1.0) 7

Statement of Revenues, Expenses and Changes in Net Assets

ATLANTA METROPOLITAN COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2003

June 30, 2003

RE VE NU E S

Operating Revenues

Student Tuition and Fees

$3,222,906.93

Less: Sponsored and Unsponsored Scholarships

(837,319.45)

Federal Appropriations

Federal Grants and C ontracts

3,162,218.38

State and Local Grants and C ontracts

58,274.11

Nongovernmental Grants and C ontracts

251,303.38

Sales and Services of Educational Departments

74,567.90

Auxiliary Enterprises

999,126.97

Other Operating Revenues

165,171.11

Total Operating Revenues

7,096,249.33

E XPE NS E S

Operating Expenses

Salaries:

Fa c u lty

3,016,417.76

S ta ff

5,078,795.13

B e ne fits

2,004,742.55

Other Personal Services

Travel

99,533.45

Scholarships and Fellowships

1,797,872.18

Utilitie s

495,977.56

Supplies and Other Services

2,978,514.32

D e p r e c ia tio n

655,328.58

Total Operating Expenses

16,127,181.53

Operating Income (loss) NONOPERATING REVENUES (EXPENSES)

(9,030,932.20)

State Appropriations

8,106,538.82

G ifts

124.24

Investment Income (endowments, auxiliary and other)

38,522.66

Interest Expense (capital assets)

Other Nonoperating Revenues

Net Nonoperating Revenues

8,145,185.72

Income before other revenues, expenses, gains, or loss

(885,746.48)

State C apital Appropriations

C apital Grants and Gifts

Federal Grants & C ontracts

State Grants & C ontracts

Other Grants and C ontracts

Total Other Revenues

0.00

Increase in Net Assets NET ASSETS

(885,746.48)

Net Assets-beginning of year, as originally reported

13,281,811.42

C umulative effect of changes in accounting principle

Prior Year Adjustments

385,158.73

Net Assets-beginning of year, restated

13,666,970.15

Net Assets-End of Year

$12,781,223.67

Annual Financial Report FY 2003 (Version 1.0) 8

Statement of Cash Flows
ATLANTA METROPOLITAN COLLEGE STATEMENT OF C ASH FLOWS
For the Year Ended June 30, 2003
CASH F LOWS F ROM OPE RATING A CTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales and Services of Educational D epartments Paym ents to Suppliers Paym ents to Em ployees Paym ents for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Em ployees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities
CASH F LOWS F ROM NON- CAPITA L F INANCING ACTIVIT IE S State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing A ctivities
CASH F LOWS F ROM CAPIT AL AND RELATED F INA NCING A CTIVITIES C apital Grants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities
CASH F LOWS F ROM INVESTING ACT IVITIES Proceeds from Sales and Maturities of Investments Interest on Investm ents Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003 $3,125,249.01
3,552,200.19 81,303.35
(6,239,034.23) (8,217,787.91) (2,635,191.63)
878,803.30
179,430.84 23,747.70
359,350.08 (8,891,929.30) 8,106,538.82
(22,755.11) 124.24
8,083,907.95
(276,865.10)
(276,865.10)
38,552.66 38,552.66 (1,046,333.79) 2,112,623.73 $1,066,289.94

Annual Financial Report FY 2003 (Version 1.0) 9

Statement of Cash Flows, Continued
RECONCILIATION OF OPERA TING LOSS TO NET CASH PROVIDE D (USED) BY OPERATING A CTIVITIES:
Operating Incom e (loss) A djustments to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating Activities
D epreciation C hange in Assets and Liabilities:
Receivables, net I n v e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($9,030,932.20)
655,328.58
321,674.47 93,882.52 (8,259.20)
(743,545.35) 79,952.68 (97,176.27)
(162,854.53)
(8,891,929.30)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current A ssets

$1,066,289.94 0.00
$1,066,289.94

Atlanta Metropolitan College had no transactions to report under Non-Cash Investing, NonCapital Financing, and Capital and Related-Financing Transactions.

Annual Financial Report FY 2003 (Version 1.0) 10

ATLANTA METROPOLITAN COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations Atlanta Metropolitan College serves the state, and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity Atlanta Metropolitan College is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Atlanta Metropolitan College as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Atlanta Metropolitan College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Atlanta Metropolitan College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the College is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of
Annual Financial Report FY 2003 (Version 1.0) 11

materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
Basis of Accounting For financial reporting purposes, the College is considered a special-purpose government engaged only in business-type activities. Accordingly, the College's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-college transactions have been eliminated.
The College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash and demand.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Consumable supplies are carried at cost using the weighted average method. Resale inventories are valued at cost using the first-in, first-out method.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the College's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
Annual Financial Report FY 2003 (Version 1.0) 12

To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Atlanta Metropolitan College when complete. For the year ended June 30, 2003, GSFIC did not transfer any capital additions to Atlanta Metropolitan College.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Atlanta Metropolitan College had accrued liability for compensated absences in the amount of $453,952.81 as of June 30, 2002. For FY2003, $349,244.51 was earned in compensated absences and employees were paid $300,144.52, for a net increase of $49,099.99. The ending balance as of June 30, 2003 in accrued liability for compensated absences is $503,052.80.
Noncurrent Liabilities Noncurrent liabilities include liabilities that will not be paid within the next fiscal year.
Net Assets The College's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional
Annual Financial Report FY 2003 (Version 1.0) 13

fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.

Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.

Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.

Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Reserve Reserve for Encumbrances Reserv e for Inventory O the r Unrestricted Total Unrestricted Net A ssets

June 30, 2003
$0.00 422,990.48 199,841.46 (523,317.23) $99,514.71

Income Taxes Atlanta Metropolitan College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and
Annual Financial Report FY 2003 (Version 1.0) 14

Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the College, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for sponsored and unsponsored scholarships.
Annual Financial Report FY 2003 (Version 1.0) 15

Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus Atlanta Metropolitan College) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus Atlanta Metropolitan College), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Annual Financial Report FY 2003 (Version 1.0) 16

Categorization of Deposits
The College's cash deposits are categorized by risk as follows:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the College or by its agent in the College's name.
Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the College's name.
Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the College's name, and amounts uncollateralized.
Cash Deposits as of June 30, 2003

Cash Deposits Investment Portfolio Accounts
Total Cash Deposits

Carrying Amount
$1,060,474.74

Bank Balances
$1,309,514.98 0.00

$1,060,474.74 $1,309,514.98

Risk Categories

1

2

3

100,000.00

$0.00 1,209,514.98

$100,000.00

$0.00 $1,209,514.98

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2003.

S tudent Tuition and Fees A uxiliary Enterprises and Other Operating A ctivities Fede ral, S tate , and Private Funds O the r
Less A llowance for D oubtful A ccounts
Net A ccounts Receivable

June 30, 2003
$413,591.66 23,679.59
257,179.25 34,935.43
729,385.93 245,000.00
$484,385.93

Annual Financial Report FY 2003 (Version 1.0) 17

Note 4. Inventories

Inventories consisted of the following at June 30, 2003.

June 30, 2003

B o o k s to r e Food S ervices Physical Plant O th e r
T o ta l

$144,851.46
49,272.44 $194,123.90

Note 5. Notes/Loans Receivable

Atlanta Metropolitan College had no notes/loans receivable for FY2003.

Annual Financial Report FY 2003 (Version 1.0) 18

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2003.

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$1,647,568.37
1,647,568.37

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

15,069,000.00 863,547.00
2,012,998.83
1,902,499.46
19,848,045.29

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

5,800,960.42 516,852.14
1,241,378.64
1,594,450.00
9,153,641.20

Total Capital Assets, Being Depreciated, Net 10,694,404.09

Capital Assets, net

$12,341,972.46

Additions $0.00 0.00

Reductions $0.00 0.00

Ending Balance 6/30/2003
$1,647,568.37 0.00
1,647,568.37

495,785.23 28,963.94
524,749.17

20,095.00 20,095.00

0.00 15,069,000.00
863,547.00 2,488,689.06
0.00 1,931,463.40
0.00 20,352,699.46

357,232.50 44,956.25
367,823.17
68,500.00
838,511.92
(313,762.75)
($313,762.75)

580,096.04 51,685.21 20,095.00
22,650.00
674,526.25
(654,431.25)
($654,431.25)

0.00 5,578,096.88
510,123.18 1,589,106.81
0.00 1,640,300.00
0.00 9,317,626.87
11,035,072.59
$12,682,640.96

Annual Financial Report FY 2003 (Version 1.0) 19

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2003.

Prepaid Tuition and Fees Research O ther D eferred Revenue
T o ta ls

June 30, 2003 $0.00
80,624.68 $80,624.68

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2003 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total
Total Long Term Obligations

Beginning Balance July 1, 2002
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2003

$0.00

$0.00

453,952.81 453,952.81

349,244.51 135,545.25 484,789.76

$453,952.81 $484,789.76

300,144.52 300,144.52

503,052.80 135,545.25 638,598.05

$300,144.52 $638,598.05

Current Portion
$0.00
291,098.28 61,452.83
352,551.11
$352,551.11

(a) Beginning balance includes FY2002 balance in current compensated absences reclassified as noncurrent in FY2003
Note 9. Lease Obligations

Atlanta Metropolitan College had no lease obligations for fiscal year 2003.

Annual Financial Report FY 2003 (Version 1.0) 20

Note 10. Retirement Plans
Teachers Retirement System Of Georgia
Plan Description Atlanta Metropolitan College participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Atlanta Metropolitan College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Atlanta Metropolitan College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$ 557,061.80 $ 505,443.41 $ 591,756.96

Regents Retirement Plan
Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.
Funding Policy Atlanta Metropolitan College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. The employer
Annual Financial Report FY 2003 (Version 1.0) 21

contributes 10.02% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.
Atlanta Metropolitan College and the covered employees made the required contributions of $84,643.74 (10.02%) and $42,237.71 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description Atlanta Metropolitan College participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $54,784.09, which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
Atlanta Metropolitan College is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Atlanta Metropolitan College and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its
Annual Financial Report FY 2003 (Version 1.0) 22

members up to a maximum lifetime benefit of $2,000,000.00 per person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Atlanta Metropolitan College, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Atlanta Metropolitan College expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Atlanta Metropolitan College (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
Note 13. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible
Annual Financial Report FY 2003 (Version 1.0) 23

for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 43 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, Atlanta Metropolitan College recognized as incurred $129,216.30 of expenditures, which was net of $65,941.58 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 24

Note 14. Natural Classifications With Functional Classifications The College's operating expenses by functional classification for FY2003 are shown below:

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003
Functional Classification FY2003

Natural Classification

Instruction

Research

Public Service

Academic Support

Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation

$3,015,368.17 833,391.95 782,081.82
17,423.33 110,044.70 49,435.91 189,790.19 19,885.45

$ 0.00

$0.00 420,757.54
94,981.12
14,165.09 13,912.89 5,074.39 217,021.41 2,208.91

$ 0.00 514,698.13 125,168.75
8,508.84
43,692.75 73,456.54
73,414.11

Total Expenses

$5,017,421.52

$ 0.00

$ 768,121.35

$ 838,939.12

Student Services
$ 1,049.59 1,114,482.07 260,771.22
20,367.44 65,185.09 32,131.46 151,475.31
4,613.14
$1,650,075.32

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003

Natural Classification

Instit utio nal Suppo rt

P lant Operat io ns & M aintenance

Functional Classification FY2003

Scho larships & Fellowships

A uxiliary Enterprises

Unallo cat ed Expenses

Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciatio n

$ 0.00 1,400,551.05 558,034.05
24,614.68
42,965.29 1,273,367.40
113,214.66

$ 0.00 672,472.29 164,832.50
1,575.09
317,824.97 390,395.07 441,992.31

$ 0.00 1,439,851.36

$ 0.00 122,442.10 18,873.09
12,878.98 168,878.14
4,852.79 683,008.40

$ 0.00

Total Expenses

$ 3,412,747.13

$ 1,989,092.23

$ 1,439,851.36

$ 1,010,933.50

$ 0.00

To tal Expenses
$ 3,016,417.76 5,078,795.13 2,004,742.55
0.00 99,533.45 1,797,872.18 495,977.56 2,978,514.32 655,328.58
$ 16,127,181.53

Annual Financial Report FY 2003 (Version 1.0) 25

AUGUSTA STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2003

Augusta State University Augusta, Georgia

William A. Bloodworth, Jr.
President

Fred Barnabei
V P for Business & Student Services

AUGUSTA STATE UNIVERSITY ANNUAL FINANCIAL REPORT
FY 2003
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 9 Statement of Revenues, Expenses and Changes in Net Assets.......................................... 10 Statement of Cash Flows ................................................................................................... 11 Note 1 Summary of Significant Accounting Policies ...................................................... 13 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 18 Note 3 Accounts Receivable............................................................................................. 20 Note 4 Inventories............................................................................................................. 21 Note 5 Notes/Loans Receivable........................................................................................ 21 Note 6 Capital Assets........................................................................................................ 22 Note 7 Deferred Revenue.................................................................................................. 23 Note 8 Long-Term Liabilities ........................................................................................... 23 Note 9 Lease Obligations.................................................................................................. 23 Note 10 Retirement Plans ................................................................................................. 24 Note 11 Risk Management................................................................................................ 25 Note 12 Contingencies...................................................................................................... 26 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 26 Note 14 Natural Classifications With Functional Classifications..................................... 28

AUGUSTA STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Augusta State University is one of the 34 institutions of the University System of Georgia. Augusta State is the primary public institution of higher learning in the state's second largest city. While it shares the technological and innovative resources of the University System, Augusta State University maintains its historical roots that make the learning experience as unique as the campus itself. The University is well known for its dedication to expanding education opportunities for people of all ages and backgrounds, with a specific emphasis on service to Georgians in the Central Savannah River Area. . Augusta State continues to grow as Fall 2002 enrollment was 5,909 versus 5,407 in the fall of 2001, an increase of nine percent. In the past two years, enrollment has grown by 16 percent. Augusta State has a teaching faculty of 203 persons, included as part of 512 total budgeted positions.

Faculty

Students

FY2003 FY2002 FY2001

203

5,909

202

5,407

202

5,090

During FY 2003, the University conferred a total of 526 bachelors degrees and 126 masters degrees. The number of undergraduate degrees awarded increased by 13 percent versus last year while the number of graduate degrees rose 4 percent.

Overview of the Financial Statements and Financial Analysis

Augusta State University is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data, including discussion and analysis of the major changes versus last year. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2002 and FY 2003.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a
Annual Financial Report FY 2003 (Version 1.0) 1

fiscal snapshot of Augusta State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements.

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets

June 30, 2003
$10,105,649.64 51,436,802.36 1,159,818.22 62,702,270.22

June 30, 2002
$7,648,839.77 34,001,520.56
1,093,940.36 42,744,300.69

Lia b ilitie s : C urre nt Liabilities Noncurre nt Liabilities Total Liabilitie s

6,688,610.47 478,286.89
7,166,897.36

4,169,827.13 4,169,827.13

Net A ssets:

Invested in C apital A ssets, net of debt 51,436,802.36

Restricted - nonexpendable

298,173.98

Restricted - expendable

2,830,976.93

C apital Projects

U n r e s tr ic te d

969,419.59

Total Net A ssets

$55,535,372.86

34,001,520.56 302,920.09
1,042,048.21
3,227,984.70 $38,574,473.56

The total assets of the institution increased by $19,957,969.53. The increase was primarily due to an increase in Capital Assets of $17,435,281.80. The major Capital Asset addition was Allgood Hall, a new classroom facility. See Note 1 in the notes to the financial statements for
Annual Financial Report FY 2003 (Version 1.0) 2

additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets. Current Assets at the end of FY 2003 were $2,456,809.87 higher than at the end of FY 2002. The increase in Current Assets is primarily in Receivables due to the timing of priority registration for Fall Semester, which was in June in 2003 versus July in 2002. Similarly, Liabilities as of June 30, 2003 increased by $2,997,070.23 due to an increase in Deferred Revenue related to the earlier fall registration. The increase in Total Net Assets primarily reflects the increase in Capital Assets, led by the addition of Allgood Hall. Restricted Net Assets increased due to the History Walk project. Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.
Annual Financial Report FY 2003 (Version 1.0) 3

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30, 2003

Operating Revenues Operating Expenses Operating Loss

$22,724,122.34 47,875,512.79 (25,151,390.45)

Nonoperating Revenues and Expenses

23,764,635.93

Incom e (Loss) B efore other revenues, expenses, gains or losses

(1,386,754.52)

Other revenues, expenses, gains or losses

16,887,246.14

Increase in Net Assets

15,500,491.62

Net Assets at beginning of year, as originally reported C um ulative effect of changes in accounting principle Prior Year Adjustm ents Net Assets at beginning of year, restated

38,574,473.56
1,460,407.68 40,034,881.24

Net Assets at End of Year

$55,535,372.86

June 30, 2002 $18,901,850.70
43,817,277.12 (24,915,426.42) 26,581,109.85
1,665,683.43 717,462.38
2,383,145.81 97,805,600.46 61,614,272.71 36,191,327.75 $38,574,473.56

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:

Annual Financial Report FY 2003 (Version 1.0) 4

Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

Operating Revenue Tuition and Fees G rants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O th e r
Total Operating Revenue
Nonoperating Revenue State Appropriations G ifts Investment Incom e G rants and C ontracts O th e r
Total Nonoperating Revenue
C apital Gifts and G rants State C apital Appropriations Other C apital G ifts and G rants
Total C apital G ifts and G rants
Total Revenues

June 30, 2003

June 30, 2002

$9,278,472.87 8,527,554.67 453,829.26 4,128,162.95 336,102.59
22,724,122.34

$8,653,333.72 5,859,690.13 443,336.99 3,532,600.90 412,888.96
18,901,850.70

23,472,649.53 171,021.33 120,965.07 21,143.00

26,051,535.00 274,663.98 254,910.87 28,512.00

23,785,778.93

26,609,621.85

16,014,659.96 851,443.18
16,866,103.14
$63,376,004.41

666,528.54 22,421.84
688,950.38
$46,200,422.93

Operating Revenues increased by $3,822,271.64 or 20 percent, versus last year. Tuition and Fees revenue increased 7 percent reflecting higher enrollment and a four percent tuition increase. Grants & Contracts revenue increased 46 percent versus FY 2002, with Federal Grants up $1,751,355.72 and nongovernmental grants up $846,671.13. The increase in Grants & Contracts was a result of the History Walk project.
Auxiliary Enterprises revenues rose 17 percent versus the prior year, primarily as a result of increased Bookstore sales.
Nonoperating Revenues decreased by ($2,823,842.92), or 11 percent, due to budget cuts in state appropriations.
The significant increase in Capital Gifts and Grants is due primarily to the addition of Allgood Hall, the first of two new classroom buildings.

Annual Financial Report FY 2003 (Version 1.0) 5

Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003
$18,562,156.97 86,233.79
353,711.94 5,382,352.74 2,903,461.76 6,204,488.45 5,746,555.67 3,255,763.85 3,955,088.00 1,425,699.62
47,875,512.79
$47,875,512.79

June 30, 2002
$19,305,003.36 73,855.25
597,433.19 4,273,254.19 2,785,119.49 5,678,517.72 4,646,339.36 2,939,243.35 3,518,511.21
43,817,277.12
$43,817,277.12

The University's Total Operating Expenses, as reported above, show an increase of 9.3 percent versus FY 2002. However, the reported figures are impacted by three accounting adjustments (explained below) that obscure a 2.1 percent decrease in "controllable" expenditures in FY 2003 versus FY 2002.
Academic Support, as reported, shows an increase from $4,273,254.19 in FY 2002 to $5,382,352.74 in FY 2003. FY 2002 benefited from a one-time reduction of $1,524,000.00 as the net book value of the library collections was capitalized last year. Excluding this accounting change, Academic Support expenses were down 2.9 percent versus last year.
Plant Operations and Maintenance shows an increase from $4,646,339.36 in FY 2002 to $5,746,555.67 in FY 2003. However, FY 2003 includes the spending to date on the History Walk and other projects that are under construction. Excluding the one-time project costs, Plant Operations and Maintenance expenses were 2.6 percent lower this year than last year.
The item shown as Unallocated Expenses of $1,425,699.62 in FY 2003 reflects an accounting adjustment related to the establishment of residual values for the University's buildings and related assets.
The University achieved an overall 2.1 percent reduction in core operating expenses (Instruction, Research, Public Service, Academic Support, Student Services, Institutional Support and Plant Operations) as noted above. Increases in salaries and wages of approximately 3.3 percent in FY 2003 and increased employee benefits costs were more than offset by the University's cost control programs implemented in response to cuts in state appropriations.
Annual Financial Report FY 2003 (Version 1.0) 6

Statement of Cash Flows
The final statement presented by the Augusta State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Year Ended June 30, 2003, Condensed

C ash Provided (used) By: Operating A ctivities Non-capital Financing Activities Investing Activities C apital and Related Financing Activities
Net C hange in C ash C ash, Beginning of Year
C ash, End of Year

June 30, 2003
($ 2 4 ,2 0 8 ,2 4 6 .3 2 ) 2 3 ,5 0 7 ,0 5 0 .5 2 1 2 0 ,9 6 5 .0 7 (1 ,0 5 3 ,4 2 4 .4 3 )
(1 ,6 3 3 ,6 5 5 .1 6 ) 6 ,2 4 8 ,4 1 9 .3 6
$ 4 ,6 1 4 ,7 6 4 .2 0

Capital Assets
Augusta State University's most significant capital assets, as reflected by their book values, are Allgood Hall, the (new) Science Building, and the Physical Education & Athletic Complex, which includes Christenberry Fieldhouse.
Completion of Allgood Hall in FY 2003 increased the University's Capital Assets by $14.6 million. (Note: An additional $2.6 million was expended for furniture and equipment as part of this GSFIC managed project). The other significant asset additions in FY 2003 included $1.1 million on the Chilled Water Loop, as additional buildings were connected to the Central Utility Plant, and $.9 million for the History Walk, Phase I.
A second, new classroom building, University Hall, is under construction and is expected to be completed in late 2004. This $21.7 million project also includes the demolition of the six former classroom buildings. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Annual Financial Report FY 2003 (Version 1.0) 7

Economic Outlook The University is not aware of any currently known factors, decisions or conditions that would have a significant impact on the University's results or financial position. As noted earlier, state appropriations to the University declined by 11 percent during FY 2003. Further budget cuts would, of course, exacerbate the situation and threaten the University's financial position and its ability to fulfill its mission. This is especially true in a time of rising enrollment and the additional cost of operating new buildings. In summary, the University expects the coming year to be a fiscal challenge, requiring tight controls on spending and prudent allocation of resources for the University to be able to meet the needs of its students, employees and community. We are confident the Augusta State University team is up to the challenge.
_______________________ William A. Bloodworth, Jr., President Augusta State University
Annual Financial Report FY 2003 (Version 1.0) 8

Statement of Net Assets
Augusta State University STATEMENT OF NET ASSETS
June 30, 2003
ASSETS Current Assets C ash and C ash Equivalents S hort-term Investm ents A ccounts Receivable, net I n v e n to r ie s Othe r A ssets Total C urrent A ssets
Noncurrent Assets Noncurrent C ash Investm ents Notes Receivable, net C apital A ssets, net Total Noncurrent A ssets TOTAL ASSETS
LIA BILIT IE S Current Liabilities A ccounts Payable and A ccrued Liabilities D eposits Deferred Revenue Othe r Liabilities D eposits Held for Othe r Organizations C om pensated A bsences (current portion) Total C urrent Liabilities Noncurrent Liabilities C om pensated A bsences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES

June 30, 2003
$4,316,590.22
4,131,616.43 448,593.59
1,208,849.40 10,105,649.64
298,173.98
861,644.24 51,436,802.36 52,596,620.58 62,702,270.22
664,588.35 1,208.25
5,017,388.40 65,052.77
262,539.50 677,833.20 6,688,610.47
478,286.89
478,286.89 7,166,897.36

NET ASSETS Invested in C apital A ssets, net of related debt Restricted for No ne x p e nd a b le Ex p e nd a b le C apital Projects U n r e s tr ic te d TOTAL NET ASSETS

51,436,802.36
298,173.98 2,830,976.93
969,419.59 $55,535,372.86

Annual Financial Report FY 2003 (Version 1.0) 9

Statement of Revenues, Expenses and Changes in Net Assets

Augusta Sta te Univ e rsity STATEMENT of REVENUES, EXPENSES, a nd C H ANGES in NET ASSETS
for the Y ear Ended June 30, 2003

June 30, 2003

RE VE NU E S

O pe ra ting R e v e nue s

S tude nt Tuition a nd Fe e s

$12,042,210.85

Less: Sponsored and Unsponsored Scholarships

(2,763,737.98)

Federal A ppropriations

Fe de ra l G ra nts a nd C ontra cts

7,008,492.05

S ta te a nd Loca l G ra nts a nd C ontra cts

138,475.45

Nongov e rnm e nta l G ra nts a nd C ontra cts

1,380,587.17

S a le s a nd S e rv ice s of Educa tiona l D e pa rtm e nts

453,829.26

A ux iliary Enterprises

4,128,162.95

O ther O perating Rev enues

336,102.59

Total O perating Rev enues

22,724,122.34

E XPE NS E S

O pe ra ting Ex pe nse s

S a la rie s :

Fa c u lty

12,825,366.44

S taff

11,881,832.37

B enefits O ther Personal S erv ices

6,597,564.17 5,241.00

Travel

194,938.32

Scholarships and Fellowships

3,773,466.95

U tilitie s

1,466,988.19

S upplie s a nd O the r S e rv ice s D epreciation

8,991,477.69 2,138,637.66

Tota l O pe ra ting Ex pe nse s

47,875,512.79

O pe ra ting Incom e (loss) NONOPERA T ING REVE NUES (EXPENSES)

(25,151,390.45)

S ta te A ppropria tions

23,472,649.53

G ifts

171,021.33

Inv e stm e nt Incom e (e ndowm e nts, a ux ilia ry a nd othe r) Inte re st Ex pe nse (ca pita l a sse ts)

120,965.07

O ther Nonoperating Rev enues

Ne t Nonope ra ting R e v e nue s

23,764,635.93

Incom e before other rev enues, ex penses, gains, or loss

(1,386,754.52)

S ta te C a pita l A ppropria tions

16,014,659.96

C a pita l G ra nts a nd G ifts

851,443.18

Fe de ra l G ra nts & C ontra cts

S ta te G ra nts & C ontra cts

O the r G ra nts a nd C ontra cts

21,143.00

Total O ther Rev enues

16,887,246.14

Increa se in Net A ssets NET ASSETS

15,500,491.62

Ne t A sse ts-be ginning of y e a r, a s origina lly re porte d

38,574,473.56

C um ula tiv e e ffe ct of cha nge s in a ccounting principle

Prior Year A djustm ents

1,460,407.68

Ne t A sse ts-be ginning of y e a r, re sta te d

40,034,881.24

Ne t A sse ts-End of Ye a r

$55,535,372.86

Annual Financial Report FY 2003 (Version 1.0) 10

Statement of Cash Flows
Augusta State University STATEMENT OF CASH FLOWS For the Year Ended June 30, 2003
CASH F LOWS F ROM OPE RATING A CTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales and Services of Educational D epartments Paym ents to Suppliers Paym ents to Em ployees Paym ents for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Em ployees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities
CASH F LOWS F ROM NON- CAPITA L F INANCING ACTIVIT IE S State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities
CASH F LOWS F ROM CAPIT AL AND RELATED F INANCING A CTIVITIES C apital Grants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities
CASH F LOWS F ROM INVESTING ACT IVITIES Proceeds from Sales and Maturities of Investm ents Interest on Investm ents Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003
$12,327,890.78
7,517,991.59 541,697.71
(17,498,751.42) (24,688,487.35)
(6,537,204.93) 357,751.13 (414,056.51)
2,430,487.96
164,293.75
1,442,581.15 50,859.35 96,700.47
(24,208,246.32)
23,472,649.53 (172,082.80) 206,483.79
23,507,050.52
(1,053,424.43)
(1,053,424.43)
120,965.07
120,965.07 (1,633,655.16) 6,248,419.36 $4,614,764.20

Annual Financial Report FY 2003 (Version 1.0) 11

Statement of Cash Flows, Continued
RECONCILIA TION OF OPERA TING LOSS TO NET CA SH PROVIDE D (USED) BY OPERATING A CTIVITIES:
Operating Incom e (loss) A djustments to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating Activities
D epreciation C hange in Assets and Liabilities:
Receivables, net I n v e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($25,151,390.45)
2,138,637.66
(3,696,865.78) 5,248.22
(390,158.13) (32,889.04)
2,716,068.65 106,414.21 96,688.34
($24,208,246.32)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current A ssets

$4,316,590.22 298,173.98
$4,614,764.20

** NON-C ASH INVESTING, NON-C APITAL FINANC ING, AND C APITAL AND RELATED FINANC ING TRANSAC TIONS

Non cash gift Assets added in capital ledger

$2,814.95 $253,629.00

Annual Financial Report FY 2003 (Version 1.0) 12

AUGUSTA STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations Augusta State University serves the second largest metropolitan area in Georgia. With a broad array of undergraduate programs and a select offering of graduate programs, it functions as a metropolitan, non-residential University for the Central Savannah River Area.
Reporting Entity Augusta State University is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Augusta State University as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Augusta State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Augusta State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of
Annual Financial Report FY 2003 (Version 1.0) 13

materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
Basis of Accounting For financial reporting purposes, the University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-university transactions have been eliminated.
The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Consumable supplies are carried at the lower of cost or market on either the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis.
Annual Financial Report FY 2003 (Version 1.0) 14

Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia (and thus Augusta State University) recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Change in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Augusta State University when complete. For the year ended June 30, 2003, GSFIC transferred capital additions valued at $15,647,896.84 to Augusta State University.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Augusta State University had accrued liability for compensated absences in the amount of $1,084,757.37 as of 7-1-2002. For FY2003, $836,799.17 was earned in compensated absences and employees were paid $765,436.45, for a
Annual Financial Report FY 2003 (Version 1.0) 15

net increase of $71,362.72. The ending balance as of 6-30-2003 in accrued liability for compensated absences is $1,156,120.09.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The University's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.
Annual Financial Report FY 2003 (Version 1.0) 16

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Reserve Reserve for Encumbrances Reserve for Inventory O ther Unrestricted Total Unre stricted Net A ssets

June 30, 2003
$639,946.55 1,136,116.07
202,948.00 (1,009,591.03)
$969,419.59

When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes Augusta State University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues The University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships.

Annual Financial Report FY 2003 (Version 1.0) 17

Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus Augusta State University) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-1759:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus Augusta State University), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Annual Financial Report FY 2003 (Version 1.0) 18

Categorization of Deposits
The University's cash deposits are categorized by risk as follows:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the University or by its agent in the University's name.
Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University's name.
Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the University's name, and amounts uncollateralized.
Cash Deposits as of June 30, 2003

Cash Deposits Investment Portfolio Accounts
Total Cash Deposits

Carrying Amount
$1,873,922.42 2,442,667.80

Bank Balances
$1,873,922.42 2,442,667.80

$4,316,590.22

$4,316,590.22

Risk Categories

1

2

$1,873,922.42 2,442,667.80

$0.00

$4,316,590.22

$0.00

3 $0.00
$0.00

Categorization of Investments
The University's investments are categorized as to credit risk within the three categories described below:
Category 1 - Insured or registered, or securities held by the University or its agent in the University's name
Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name.
Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University's name.

Annual Financial Report FY 2003 (Version 1.0) 19

At June 30, 2003, the University's investments consisted of the following:

Type of Investm e nts
C om m on S tock C orporate Bonds S ecurities and C orporate O bligations

Risk C ategories

1

2

$0.00

$0.00

3 $0.00

C arrying Amount
$0.00 0.00 0.00

T o ta ls

$0.00

$0.00

$0.00

$0.00

Investm e nts Not S ubject to C ategorizations: B oard of R egents
S hort-Term Fund Balanced Income Fund Total Return Fund Investm e nt Portfolio A ccounts Mutual Funds R eal Estate S tate Investm ent Pool S hort-Term Investm ents
Total Investm ents

2,360,550.61 283,855.39
82,117.19 $2,726,523.19

Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool.

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2003.

June 30, 2003

S tudent Tuition and Fees A uxiliary Enterprises and Other Operating A ctivities Fede ral, S tate , and Private Funds O the r
Less A llowance for D oubtful A ccounts

$2,660,824.07 217,670.76
1,232,499.89 35,052.22
4,146,046.94 14,430.51

Net A ccounts Receivable

$4,131,616.43

Annual Financial Report FY 2003 (Version 1.0) 20

Note 4. Inventories

Inventories consisted of the following at June 30, 2003.

B o o k s to r e Food S ervices Physical Plant O th e r
T o ta l

June 30, 2003
$418,051.64
18,178.22 12,363.73 $448,593.59

Note 5. Notes/Loans Receivable
Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2003 and 2002. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The University has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2003 the allowance for uncollectible loans was approximately $2,900.00.

Annual Financial Report FY 2003 (Version 1.0) 21

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2003.

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$2,152,770.49
2,152,770.49

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

40,451,698.67 1,657,751.00 5,282,815.45
6,987,184.63
54,379,449.75

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

12,510,455.57 1,096,469.66 3,460,853.45
5,462,921.00
22,530,699.68

Total Capital Assets, Being Depreciated, Net 31,848,750.07

Capital Assets, net

$34,001,520.56

Additions
$0.00 718,719.90 718,719.90
1,782,696.82 14,394,658.88
1,091,081.54 767,572.92
103,991.87 75,005.00
18,215,007.03
144,393.11 (9,109.95) (7,188.74)
455,364.10
319,248.00
902,706.52
17,312,300.51
$18,031,020.41

Reductions $0.00 0.00

Ending Balance 6/30/2003
$2,152,770.49 718,719.90
2,871,490.39

774,468.50 37,662.00
812,130.50

1,782,696.82 54,846,357.55
2,748,832.54 5,275,919.87
0.00 7,053,514.50
75,005.00 71,782,326.28

178,729.89 37,662.00
216,391.89 595,738.61 $595,738.61

144,393.11 12,501,345.62
1,089,280.92 3,737,487.66
0.00 5,744,507.00
0.00 23,217,014.31
48,565,311.97
$51,436,802.36

Annual Financial Report FY 2003 (Version 1.0) 22

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2003.

Prepaid Tuition and Fees Research O ther D eferred Revenue
T o ta ls

June 30, 2003 $4,842,918.24
174,470.16 $5,017,388.40

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2003:

Leases Lease Obligations

Beginning Balance July 1, 2002
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2003

$0.00

$0.00

Current Portion
$0.00

Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total

1,084,757.37 1,084,757.37

836,799.17 836,799.17

765,436.45 765,436.45

1,156,120.09 0.00
1,156,120.09

677,833.20 677,833.20

Total Long Term Obligations

$1,084,757.37 $836,799.17

$765,436.45 $1,156,120.09

$677,833.20

(a) The beginning balance includes the amount shown as current in FY2002 and reclassified as long-term in FY2003.

Note 9. Lease Obligations

OPERATING LEASES

Augusta State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2003 through 2004. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment.

Annual Financial Report FY 2003 (Version 1.0) 23

Note 10. Retirement Plans

Teachers Retirement System Of Georgia

Plan Description Augusta State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Augusta State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Augusta State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$1,290,111.42 $1,271,931.26 $1,670,714.78

Regents Retirement Plan
Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.
Funding Policy Augusta State University makes monthly employer contributions for the Regents Retirement Plan at rated adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation. Employees
Annual Financial Report FY 2003 (Version 1.0) 24

contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.
Augusta State University and the covered employees made the required contributions of $896,139.70 (10.02%) and $422,658.28 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description Augusta State University participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $50,521.24 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
Augusta State University is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Augusta State University and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue
Annual Financial Report FY 2003 (Version 1.0) 25

Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Augusta State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Augusta State University expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Augusta State University (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
Note 13. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University
Annual Financial Report FY 2003 (Version 1.0) 26

System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 136 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, Augusta State University recognized as incurred $611,935.26 of expenditures, which was net of $149,584.48 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 27

Note 14. Natural Classifications With Functional Classifications The University's operating expenses by functional classification for FY2003 are shown below:

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003
Functional Classification FY2003

Natural Classification

Instruction

Research

Public Service

Academic Support

Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation

$12,817,024.24 1,216,384.55 3,086,493.03
70,642.49 29,120.00 114,133.18 1,202,601.08 25,758.40

$0.00 38,635.57
531.88
27,349.01
290.87 19,426.46

$0.00 122,864.52 33,035.27
3,229.75 194,214.96
367.44

$6,422.20 2,709,656.61
616,999.03
20,832.54
54,171.70 1,609,764.36 364,506.30

Total Expenses

$18,562,156.97

$86,233.79

$353,711.94

$5,382,352.74

Student Services
$1,920.00 1,633,948.07 408,265.88
27,086.31 34,338.74 45,950.69 744,108.33 7,843.74
$2,903,461.76

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003

Natural Classification

Institutional Support

Plant Operations & Maintenance

Functional Classification FY2003

Scholarships & Fellowships

Auxiliary Enterprises

Unallocated Expenses

Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation

$0.00 3,264,344.74 1,640,949.35
3,072.00 24,924.00
1,206.00 56,776.42 1,183,863.46 29,352.48

$0.00 2,148,347.35
628,566.77 (69,422.65)
1,910.35
1,161,739.50 1,853,481.09
21,933.26

$0.00 1,826.20
3,253,937.65

$0.00 745,824.76 182,722.96
71,591.65 22,193.62 454,864.56 30,696.08 2,437,646.95 9,547.42

$0.00
(253,629.00) 1,679,328.62

Total Expenses

$6,204,488.45

$5,746,555.67

$3,255,763.85

$3,955,088.00

$1,425,699.62

Total Expenses
$12,825,366.44 11,881,832.37 6,597,564.17 5,241.00 194,938.32 3,773,466.95 1,466,988.19 8,991,477.69 2,138,637.66
$47,875,512.79

Annual Financial Report FY 2003 (Version 1.0) 28

BAINBRIDGE COLLEGE
Financial Report
For the Year Ended June 30, 2003

Bainbridge College Bainbridge, Georgia

Clifford Brock, President

Nancy Kin, Vice President for Fiscal Affairs

BAINBRIDGE COLLEGE ANNUAL FINANCIAL REPORT
FY 2003
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 7 Statement of Revenues, Expenses and Changes in Net Assets............................................ 8 Statement of Cash Flows ..................................................................................................... 9 Note 1 Summary of Significant Accounting Policies ...................................................... 11 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 16 Note 3 Accounts Receivable............................................................................................. 18 Note 4 Inventories............................................................................................................. 19 Note 5 Notes/Loans Receivable........................................................................................ 19 Note 6 Capital Assets........................................................................................................ 20 Note 7 Deferred Revenue.................................................................................................. 21 Note 8 Long-Term Liabilities ........................................................................................... 21 Note 9 Lease Obligations.................................................................................................. 21 Note 10 Retirement Plans ................................................................................................. 22 Note 11 Risk Management................................................................................................ 23 Note 12 Contingencies...................................................................................................... 24 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 24 Note 14 Natural Classifications With Functional Classifications..................................... 26

BAINBRIDGE COLLEGE
Management's Discussion and Analysis

Introduction

Bainbridge College is one of the 34 institutions of the University System of Georgia. The College, located in Bainbridge, Georgia, was founded in 1970 with construction of the original five buildings beginning in July 1972; classes began October 1, 1973. The Division of Vocational/Technical Education and the Department of Developmental Education were added during the academic year 1973-74. A unique agreement, which continues to this day, between the Board of Regents and Georgia Department of Technical and Adult Education, made the addition of the vocational/technical programs possible. Bainbridge College is the only comprehensive community college in southwest Georgia and is fully accredited by the Commission on Colleges of the Southern Association of Colleges and Schools. The College has experienced phenomenal growth as shown by the following chart.

Employees Students

Fall 2003 Fall 2002 Fall 2001

116

2,125

111

2,047

105

1,735

Overview of the Financial Statements and Financial Analysis

Bainbridge College is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2002 and FY 2003.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Bainbridge College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements.

Annual Financial Report-Bainbridge College-FY 2003 1

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

A sse ts: C urre nt A sse ts C a pita l A sse ts, ne t O the r A sse ts T o ta l A sse ts
Lia bilitie s: C urre nt Lia bilitie s No ncurre nt Lia bilitie s T o ta l Lia bilitie s

June 30, 2003
$2,513,099.41 4,072,169.20 14,966.12 6,600,234.73
1,031,631.86 169,377.92
1,201,009.78

June 30, 2002
$1,858,780.18 3,557,919.13 5,155.62 5,421,854.93
806,608.43
806,608.43

Ne t A sse ts: Inv e ste d in C a pita l A sse ts, ne t o f de bt R e stricte d - no ne x pe nda ble R e stricte d - e x p e nda ble C a pita l P ro je cts U nre stricte d T o ta l Ne t A sse ts

4,072,169.20 509,602.25 95,497.94
721,955.56 $5,399,224.95

3,557,919.13 561,838.23
495,489.14 $4,615,246.50

The total assets of the institution increased by $1,178,379.80. However, a review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $514,205.07 of investment in plant, net of accumulated depreciation. See Note 1 in the notes to the financial statements for additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets. Current Assets showed a shift from Short-term Investments to Accounts Receivable at year-end. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution.

Annual Financial Report-Bainbridge College-FY 2003 2

The total liabilities for the year increased by $394,401.35. The combination of the increase in total assets of $1,178,379.80 and the increase in total liabilities of $394,401.35 yields an increase in total net assets of $783,978.45. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $514,250.07.

Statement of Revenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

Operating Revenues Operating Expenses Operating Loss

June 30, 2003
$6,432,927.17 11,108,237.33 (4,675,310.16)

June 30, 2002
$5,229,850.90 9,788,456.17 (4,558,605.27)

Nonoperating Revenues and Expenses

4,696,475.64

4,794,728.55

Income (Loss) Before other revenues, expenses, gains or losses

21,165.48

236,123.28

Other revenues, expenses, gains or losses

377,132.69

Increase in Net Assets

398,298.17

236,123.28

Net Assets at beginning of year, as originally reported C umulative effect of changes in accounting principle Prior Year Adjustments Net Assets at beginning of year, restated
Net Assets at End of Year

4,615,246.50
385,680.28 5,000,926.78
$5,399,224.95

11,661,505.18 7,282,381.96
4,379,123.22
$4,615,246.50

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:

Annual Financial Report-Bainbridge College-FY 2003 3

Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

June 30, 2003

Operating Revenue Tuition and Fees G rants and C ontracts Sales and S ervices of Educational D epartm A ux ilia r y O the r

$1,362,458.90 4,305,723.66 182,719.49 559,262.70 22,762.42

Total Operating Revenue

6,432,927.17

Nonoperating Revenue State A ppropriations G ifts Investment Income G rants and C ontracts O th e r

4,662,495.27 33,980.37

Total Nonoperating Revenue

4,696,475.64

C apital G ifts and Grants State C apital Appropriations Other C apital G ifts and G rants

377,132.69

Total C apital Gifts and G rants

377,132.69

Total Revenues

$11,506,535.50

June 30, 2002
$957,931.80 3,567,092.55
202,267.23 468,232.65
34,326.67 5,229,850.90
4,765,766.00 28,962.55
4,794,728.55
0.00 $10,024,579.45

Annual Financial Report-Bainbridge College-FY 2003 4

Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

O pe ra ting Ex pe nse s I n s tr u c tio n Research Public S ervice Academ ic Support S tude nt S e rv ice s Institutiona l S upport P la nt O pe ra tio ns a nd Ma inte na nce S cholarships and Fellowships A ux ilia ry Ente rprise s Una llocate d Ex pe nse s Patie nt C are (MC G only )
Tota l O pe ra ting Ex pe nse s
Nonope ra ting Ex pe nse s Inte re st Ex pe nse (C apital A sse ts)
Tota l Ex pe nse s

June 30, 2003 $4,701,441.45
752,320.35 622,436.72 1,688,449.48 1,156,642.67 1,681,107.95 505,838.71
11,108,237.33
$11,108,237.33

June 30, 2002 $4,126,447.38
759,640.78 571,056.54 790,908.60 1,029,574.25 2,094,534.04 416,294.58
9,788,456.17
$9,788,456.17

All student driven revenue depicts increases. Student Tuition and Fees increased $689,969.66, while Sponsored and Unsponsored Scholarships increased in the amount of $285,442.56, Federal Grants and Contracts increased $722,896.84, and Auxiliary Enterprises increased $91,030.05; all depicting the continued increase in enrollment. Other operating revenues remained relatively unchanged.
The compensation and employee benefits category increased by approximately $729,602.44. The increase reflects a pay raise for the employees of the institution of approximately three percent with the associated fringe benefits. The increase also reflects an increased cost of health insurance for the employees of the institution.
Scholarships and Fellowships increased by approximately $541,322.96 during the past year. The increase was primarily associated with the increased Federal Aid and HOPE.
Under non-operating revenues (expenses) state appropriations decreased by approximately ($103,270.73). While the institution received a 2.2% reduction in allocation from the state, given the mandatory cost increases of various categories of expenses and the increased enrollment, the College managed a small surplus.
Statement of Cash Flows
The final statement presented by the Bainbridge College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second
Annual Financial Report-Bainbridge College-FY 2003 5

section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Year Ended June 30, 2003, Condensed

C ash Provided (used) By: Operating A ctivities Non-capital Financing Activities Investing Activities C apital and Related Financing Activities
Net C hange in C ash C ash, Beginning of Year
C ash, End of Year

June 30, 2003
($ 4 ,8 9 0 ,3 2 8 .5 7 ) 4 ,5 2 2 ,4 4 4 .2 8 2 4 ,2 9 4 .5 7 (7 7 ,6 4 4 .6 1 )
(4 2 1 ,2 3 4 .3 3 ) 1 ,1 0 1 ,5 2 9 .7 9
$ 6 8 0 ,2 9 5 .4 6

Capital Assets

The College had one capital asset addition for facilities in fiscal year 2003. The addition to the Student Center was completed in March and the Bookstore was relocated to the new area.

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Economic Outlook

The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is strong. Even with a relatively flat funded year, the College was able to generate a modest increase in Net Assets. The College anticipates the current fiscal year will be more conservative than last and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues.

_______________________ Clifford Brock, President Bainbridge College

Annual Financial Report-Bainbridge College-FY 2003 6

Statement of Net Assets
B AINB RIDGE C O LLE GE STATEMENT O F NET ASSETS
June 30, 2003
ASSETS Curre nt Asse ts C ash and C a sh Equiv a le nts S ho rt-te rm Inv e stm e nts A ccounts R e ce iv a ble , ne t Inv e ntorie s O the r A sse ts Total C urre nt A sse ts
Noncurre nt Asse ts Noncurrent C ash Inv e stm e nts Note s R e ce iv a ble , ne t C apita l A sse ts, ne t Total Noncurre nt A sse ts TOTAL ASSETS
LIA BILIT IE S Curre nt Liabilitie s A ccounts P ay a ble a nd A ccrue d Liabilitie s D e po sits D eferred Revenue O the r Lia bilitie s D e po sits He ld for O the r O rga niza tio ns C om pe nsa te d A bse nce s (curre nt po rtion) Total C urre nt Lia bilitie s Noncurre nt Liabilitie s C om pe nsa te d A bse nce s Long-te rm Lia bilitie s Total Noncurre nt Lia bilitie s TOTAL LIABILITIES

June 30, 2003
$680,295.46
1,685,592.27 145,587.68 1,624.00
2,513,099.41
14,966.12 4,072,169.20 4,087,135.32 6,600,234.73
274,788.43 765.60
609,434.89 (23,236.73)
90,322.40 79,557.27 1,031,631.86
169,377.92
169,377.92 1,201,009.78

NET ASSETS Inv e ste d in C a pita l A sse ts, ne t o f re la te d de bt R e stricte d fo r No n e x p e n d a b le E x p e n d a b le C a pita l P roje cts Unre stricte d TOTAL NET ASSETS

4,072,169.20
509,602.25 95,497.94
721,955.56 $5,399,224.95

Annual Financial Report-Bainbridge College-FY 2003 7

Statement of Revenues, Expenses and Changes in Net Assets

B A INB RIDGE C O LLE GE STATE M E NT of RE V E NUE S, E X PE NSE S, a nd C H ANGE S in NE T ASSE TS
for the Y e a r Ende d June 30, 2003
June 30, 2003
REVE NUES

O pe ra ting R e v e nue s

S tude nt Tuitio n a nd Fe e s

$2,585,998.84

Le ss: S ponsored and Unsponsored S cholarships

(1,223,539.94)

Fe de ra l A ppro pria tio ns

Fe de ra l G ra nts a nd C ontra cts

3,566,857.26

S ta te a nd Lo ca l G ra nts a nd C o ntra cts

666,783.93

No ngo v e rnm e nta l G ra nts a nd C o ntra cts

72,082.47

S a le s a nd S e rv ice s o f Educa tio na l D e pa rtm e nts

182,719.49

A ux ilia ry Ente rprise s O the r O pe ra ting R e v e nue s
Tota l O pe ra ting R e v e nue s

559,262.70 22,762.42
6,432,927.17

E XPE NS E S

O pe ra ting Ex pe nse s

S alarie s:

Fa culty S ta ff

2,633,338.77 2,548,167.84

B e ne fits O the r P e rso na l S e rv ice s

1,352,530.65 (133.31)

Travel

96,876.16

S chola rships and Fellowships Utilitie s S upplie s a nd O the r S e rv ice s D e pre cia tion

1,738,770.95 263,646.53
2,123,284.63 351,755.11

T o ta l O pe ra ting Ex pe nse s

11,108,237.33

O pe ra ting Inco m e (lo ss) NONOPE RA T ING REVENUES (EXPENSE S)

(4,675,310.16)

S ta te A ppro pria tio ns

4,662,495.27

G ifts

Inv e stm e nt Inco m e (e ndo w m e nts, a ux ilia ry a nd o the r) Inte re st Ex pe nse (ca pita l a sse ts)

33,980.37

O the r No no pe ra ting R e v e nue s

Ne t Nono pe ra ting R e v e nue s

4,696,475.64

Inco m e be fo re o the r re v e nue s, e x pe nse s, ga ins, o r lo ss

21,165.48

S ta te C a pita l A ppro pria tio ns

C a pita l G ra nts a nd G ifts Fe de ra l G ra nts & C o ntra cts S ta te G ra nts & C o ntra cts

377,132.69

O the r G ra nts a nd C o ntra cts

To ta l O the r R e v e nue s

377,132.69

Incre a se in Ne t A sse ts NET ASSETS

398,298.17

Ne t A sse ts-be ginning o f y e a r, a s o rigina lly re po rte d

4,615,246.50

C um ula tiv e e ffe ct of cha nge s in a ccounting principle

P rio r Ye a r A djustm e nts

385,680.28

Ne t A sse ts-be ginning o f y e a r, re sta te d

5,000,926.78

Ne t A sse ts-End o f Ye a r

$5,399,224.95

Annual Financial Report-Bainbridge College-FY 2003 8

Statement of Cash Flows
BAINBRIDGE COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2003
CASH F LOWS F ROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities
CASH F LOWS F ROM NON-CAPITAL F INANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities
CASH F LOWS F ROM CAPITAL AND RELATED F INANCING ACTIVITIES C apital Grants and Gifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital Debt and Leases Interest Paid on C apital Debt and Leases Net C ash used by C apital and Related Financing Activities
CASH F LOWS F ROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003 $2,605,628.51
3,923,191.46 183,501.53
(4,052,786.15) (5,175,789.28) (2,962,310.89)
(11,018.00) 1,207.50
524,085.41 1,248.00
13,474.04 59,239.30 (4,890,328.57) 4,662,495.27 (140,050.99) 4,522,444.28
(77,644.61)
(77,644.61)
24,294.57 24,294.57 (421,234.33) 1,101,529.79 $680,295.46

Annual Financial Report-Bainbridge College-FY 2003 9

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating Activities
D e pr e c ia tio n C hange in Assets and Liabilities:
Receivables, net I nv e nto r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($4,675,310.16)
348,531.42
(480,144.00) 26,520.79 (1,624.00)
(170,973.52) 101,769.89
7,833.79 (46,932.78)
($4,890,328.57)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current Assets

$680,295.46 $680,295.46

Bainbridge College had no transactions to report under Non-Cash Investing, Non-Capital Financing, and Capital and Related-Financing Transactions.

Annual Financial Report-Bainbridge College-FY 2003 10

BAINBRIDGE COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations Bainbridge College serves the state, and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity Bainbridge College is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Bainbridge College as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Bainbridge College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Bainbridge College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the College is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of
Annual Financial Report-Bainbridge College-FY 2003 11

materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
Basis of Accounting For financial reporting purposes, the College is considered a special-purpose government engaged only in business-type activities. Accordingly, the College's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-college transactions have been eliminated.
The College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The College accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Consumable supplies are carried at the lower of cost or market on either the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis.
Annual Financial Report-Bainbridge College-FY 2003 12

Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the College's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a College residence hall.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Bainbridge College had accrued liability for compensated absences in the amount of $275,943.80 as of 7-1-2002. For FY2003, $219,698.31 was earned in compensated absences and employees were paid $231,865.25. An increase in the amount of $19,924.17 was made for the FICA/Medicare (.0765) which was omitted in the FY2002 AFR. A reduction in compensated absences of $34,765.84 was made for the salary changes and 360-hour annual leave cap. The result is a net decrease of $27,008.61. The ending balance as of 6-302003 in accrued liability for compensated absences is $248,935.19.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities
Annual Financial Report-Bainbridge College-FY 2003 13

that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.

Net Assets The College's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.

Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.

Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.

Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.

Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted Total Unrestricted Net Assets

June 30, 2003
$0.00 476,967.98
14,706.33 230,281.25 $721,955.56

Annual Financial Report-Bainbridge College-FY 2003 14

When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes Bainbridge College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the College, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for sponsored and unsponsored scholarships.
Annual Financial Report-Bainbridge College-FY 2003 15

Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus Bainbridge College) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus Bainbridge College), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Annual Financial Report-Bainbridge College-FY 2003 16

Categorization of Deposits
The College's cash deposits are categorized by risk as follows:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the College or by its agent in the College's name.
Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the College's name.
Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the College's name, and amounts uncollateralized.
Cash Deposits as of June 30, 2003

Cash Deposits Investment Portfolio Accounts
Total Cash Deposits

Carrying Amount
$111,271.43

Bank Balances
$402,358.75

$111,271.43

$402,358.75

Risk Categories

1

2

$200,000.00

$202,358.75

$200,000.00

$202,358.75

3 $0.00
$0.00

Categorization of Investments
The College's investments are categorized as to credit risk within the three categories described below:
Category 1 - Insured or registered, or securities held by the College or its agent in the College's name
Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the College's name.
Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the College's name.

Annual Financial Report-Bainbridge College-FY 2003 17

At June 30, 2003, the College's investments consisted of the following:

Type of Investments
C ommon Stock C orporate Bonds Securities and C orporate O b lig a tio n s

Risk C ategories

1

2

$0.00

$0.00

3 $0.00

C arrying Amount
$0.00 0.00 0.00

T o ta ls

$0.00

$0.00

$0.00

$0.00

Investments Not Subject to C ategorizations: Board of Regents
Short-Term Fund Balanced Income Fund Total Return Fund Investment Portfolio Accounts Mutual Funds Real Estate State Investment Pool Short-Term Investments
Total Investments

569,024.03 $569,024.03

Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the College did not own any specific, identifiable investment securities of the pool.

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2003.
June 30, 2003

S tu d e n t T u itio n a n d Fe e s A u x ilia ry E n te rp ris e s a n d O th e r O p e ra tin g A c tiv itie s Fe d e ra l, S ta te , a n d P riv a te Fu n d s O th e r
Le s s A llo w a n c e fo r D o u b tfu l A c c o u n ts

$ 5 3 ,9 7 1 .1 9 4 1 ,8 1 6 .7 3
1 ,1 2 2 ,4 7 4 .0 0 4 6 7 ,3 3 0 .3 5
1 ,6 8 5 ,5 9 2 .2 7

N e t A cc o u n ts R e ce iv a b le

$ 1 ,6 8 5 ,5 9 2 .2 7

Annual Financial Report-Bainbridge College-FY 2003 18

Note 4. Inventories

Inventories consisted of the following at June 30, 2003.

B o o k s to re Fo o d S e r v ic e s P h y s ic a l P la n t O th e r
T o ta l

June 30, 2003 $ 1 3 5 ,7 9 7 .8 3
9 ,7 8 9 .8 5 $ 1 4 5 ,5 8 7 .6 8

Note 5. Notes/Loans Receivable
Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2003 and 2002. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the College for amounts cancelled under these provisions. As the College determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The College has not provided an allowance for uncollectible loans due to the fact that the institutional funds were provided by private sources and the total amount of these loan funds are not material.

Annual Financial Report-Bainbridge College-FY 2003 19

Note 6. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2003.

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$99,269.00
99,269.00

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

961,540.00 5,401,230.02
650,861.00 1,018,530.87
0.00 887,640.31
0.00 8,919,802.20

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

366,106.01 2,860,103.37
382,997.81 719,392.97
0.00 731,540.00
0.00 5,060,140.16

Total Capital Assets, Being Depreciated, Net 3,859,662.04

Capital Assets, net

$3,958,931.04

Additions $0.00 0.00

Reductions $0.00 0.00

Ending Balance 6/30/2003
$99,269.00 0.00
99,269.00

270,697.69 240,659.04
14,329.00 525,685.73

67,749.58 3,007.00
70,756.58

961,540.00 5,671,927.71
650,861.00 1,191,440.33
0.00 898,962.31
0.00 9,374,731.35

33,278.51 145,019.59
34,272.71 109,817.30
29,367.00
351,755.11
173,930.62
$173,930.62

11,402.12 (1,338.00) 10,064.12 60,692.46 $60,692.46

399,384.52 3,005,122.96
417,270.52 817,808.15
0.00 762,245.00
0.00 5,401,831.15
3,972,900.20
$4,072,169.20

Annual Financial Report-Bainbridge College-FY 2003 20

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2003.

P r e p a id T u itio n a n d Fe e s R esearch O th e r D e fe rre d R e v e n u e
T o ta ls

June 30, 2003 $ 6 0 1 ,0 5 5 .9 0 8 ,3 7 8 .9 9 $ 6 0 9 ,4 3 4 .8 9

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2003 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total
Total Long Term Obligations

Beginning Balance July 1, 2002
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2003

$0.00

$0.00

275,943.80

239,622.48

275,943.80

239,622.48

$275,943.80 $239,622.48

266,631.09 266,631.09

248,935.19 0.00
248,935.19

$266,631.09 $248,935.19

Current Portion
$0.00
79,557.27 79,557.27 $79,557.27

(a) The beginning balance includes the amount shown as current in FY2002 and reclassified as long-term in FY2003

Note 9. Lease Obligations Bainbridge College had no lease obligations in fiscal year 2003.

Annual Financial Report-Bainbridge College-FY 2003 21

Note 10. Retirement Plans

Teachers Retirement System Of Georgia

Plan Description Bainbridge College participates in the Teachers Retirement System of Georgia (TRS), a costsharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Bainbridge College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Bainbridge College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$303,042.28 $281,795.15 $387,933.43

Regents Retirement Plan
Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.
Funding Policy Bainbridge College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statue and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation. Employees contribute 5% of their
Annual Financial Report-Bainbridge College-FY 2003 22

earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times.
Bainbridge College and the covered employees made the required contributions of $99,596.59 (10.02%) and $49,726.80 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description Bainbridge College participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $34,499.35 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
Bainbridge College is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Bainbridge College and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has
Annual Financial Report-Bainbridge College-FY 2003 23

contracted with Blue Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Bainbridge College, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Bainbridge College expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Bainbridge College (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
Note 13. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University
Annual Financial Report-Bainbridge College-FY 2003 24

System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 31 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, Bainbridge College recognized as incurred $137,067.17 of expenditures, which was net of $67,621.07 of participant contributions.
Annual Financial Report-Bainbridge College-FY 2003 25

Note 14. Natural Classifications With Functional Classifications

The College's operating expenses by functional classification for FY2003 are shown below:

St at ement of Operat ing Expenses - Nat ural vs F unc t ional Classific at ions F or t he F isc al Y ear Ended June 30, 2003
F unc t ional Classific at ion FY 2003

Na tura l C la ssifica tion

Instructio n

P u b lic Research Service

Academ ic Support

S tudent S e rv ic e s

F aculty Staff B enefits P erso nal Serv ic es T rav el Sc ho larships and F ello wships Ut ilit ies Supplies and Others Services D epreciatio n

$ 2,633,338.77 584,445.45 709,425.82
58,414.46 58,420.00 27,762.46 625,522.59
4,111.90

$ 0.00

$ 0.00

$ 0.00 432,629.76 109,297.47
5,496.80
20,665.36 154,874.15 29,356.81

$ 0.00 397,977.28 103,731.96
14,221.67 364.00
5,410.59 99,614.22
1,117.00

T o tal Expens es

$ 4,701,441.45

$ 0.00

$ 0.00

$ 752,320.35

$ 622,436.72

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003

Natural Classification

Inst it ut io nal Suppo rt

P lant Operatio ns & M aintenance

Functional Classification FY2003

Scho larships & Fellowships

A uxiliary Enterprises

Unallo cated Expenses

Faculty Staff B enef it s Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciat io n

$ 0.00 799,148.56 318,345.56
18,567.73
18,748.38 520,613.14
13,026.11

$ 0.00 304,968.63 100,927.89
(4,058.93) 174.14
189,625.02 260,862.63 304,143.29

$ 0.00 1,121.00 1,679,986.95

$ 0.00 28,998.16 9,680.95 3,925.62
1.36
1,434.72 461,797.90

$ 0.00

Total Expenses

$ 1,688,449.48

$ 1,156,642.67

$ 1,681,107.95

$ 505,838.71

$ 0.00

To t al Expenses
$ 2,633,338.77 2,548,167.84 1,352,530.65 (133.31) 96,876.16 1,738,770.95 263,646.53 2,123,284.63 351,755.11
$ 11,108,237.33

Annual Financial Report-Bainbridge College-FY 2003 26

CLAYTON COLLEGE and
STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2003

Clayton College and State University Morrow, Georgia

Thomas K. Harden President

Patrick J. O'Hare Vice President for Operations, Planning, and Budgeting

CLAYTON COLLEGE AND STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2003
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 7 Statement of Revenues, Expenses and Changes in Net Assets............................................ 8 Statement of Cash Flows ..................................................................................................... 9 Note 1 Summary of Significant Accounting Policies ...................................................... 11 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 16 Note 3 Accounts Receivable............................................................................................. 18 Note 4 Inventories............................................................................................................. 19 Note 5 Notes/Loans Receivable........................................................................................ 19 Note 6 Capital Assets........................................................................................................ 20 Note 7 Deferred Revenue.................................................................................................. 21 Note 8 Long-Term Liabilities ........................................................................................... 21 Note 9 Lease Obligations.................................................................................................. 21 Note 10 Retirement Plans ................................................................................................. 22 Note 11 Risk Management................................................................................................ 23 Note 12 Contingencies...................................................................................................... 24 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 24 Note 14 Natural Classifications With Functional Classifications..................................... 26

CLAYTON COLLEGE AND STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Clayton College and State University is one of the 34 institutions of the University System of Georgia. The University, located in Morrow, Georgia, was founded in 1969 and has become known for its integration of technology into all degree programs. Through implementation of the ITP Choice program in 1998 the University became one of only three public universities nationwide to require notebook computers for all students. Currently, Clayton College and State University is one of thirty-six "notebook" universities in the nation. The University offers technical certificates, associate and baccalaureate degrees in a wide variety of subjects. This wide range of educational opportunities attracts a highly qualified faculty and a student body of more than 5,000 students each year. The institution continues to grow as shown by the comparison numbers that follow.

Faculty

Students

FY2003 FY2002 FY2001

293

5,212

289

4,675

286

4,456

Overview of the Financial Statements and Financial Analysis

Clayton College and State University is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2002 and FY 2003.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Clayton College and State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and noncurrent), and Net Assets (Assets minus Liabilities). The difference between current and noncurrent assets will be discussed in the footnotes to the financial statements.

Annual Financial Report FY 2003 (Version 1.0) 1

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

Assets: C urrent Assets C apital Assets, net Other Assets Total Assets

June 30, 2003
$5,598,350.64 28,393,299.11
948,618.13 34,940,267.88

June 30, 2002
$8,017,722.76 27,427,956.72
10,535.41 35,456,214.89

Liabilities: C urrent Liabilities Noncurrent Liabilities Total Liabilities

2,067,919.72 615,159.09
2,683,078.81

2,404,832.47 2,404,832.47

Net Assets: Invested in C apital Assets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects Unrestricted Total Net Assets

28,393,299.11 951,475.89
13,747,093.42 (181,613.06)
(10,653,066.29) $32,257,189.07

24,747,045.95
13,798,847.71 (181,613.06)
(5,312,898.18) $33,051,382.42

The total assets of the institution decreased by ($515,947.01) as a result of falling State appropriations. Increased tuition and fee receipts partially offset the decrease. See Note 1 in the notes to the financial statements for additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution.

Annual Financial Report FY 2003 (Version 1.0) 2

The total liabilities for the year increased by $278,246.34. The primary cause for the increase was in non-current liabilities, primarily in compensated absences. The combination of the decrease in total assets of ($515,947.01) and the increase in total liabilities of $278,246.34 yields a decrease in total net assets of ($794,193.35).

Statement of Revenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

Operating Revenues Operating Expenses Operating Loss

June 30, 2003
$32,372,834.19 51,000,733.54 (18,627,899.35)

June 30, 2002
$27,674,222.46 51,615,999.98 (23,941,777.52)

Nonoperating Revenues and Expenses

17,490,654.41

18,741,879.59

Income (Loss) Before other revenues, expenses, gains or losses

(1,137,244.94)

(5,199,897.93)

Other revenues, expenses, gains or losses

115,055.00

Increase in Net Assets

(1,022,189.94)

(5,199,897.93)

Net Assets at beginning of year, as originally reported C umulative effect of changes in accounting principle Prior Year Adjustments Net Assets at beginning of year, restated
Net Assets at End of Year

33,051,382.42
227,996.59 33,279,379.01
$32,257,189.07

69,527,124.10 31,275,843.75
38,251,280.35
$33,051,382.42

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a decrease in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:
Annual Financial Report FY 2003 (Version 1.0) 3

Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

Operating Revenue Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Auxiliary Other
Total Operating Revenue
Nonoperating Revenue State Appropriations Gifts Investment Income Grants and Contracts Other
Total Nonoperating Revenue
Capital Gifts and Grants State Capital Appropriations Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

June 30, 2003

June 30, 2002

$9,800,060.05 13,963,951.21
2,533,122.97 5,336,094.33
739,605.63
32,372,834.19

$8,664,131.81 11,520,263.87
2,787,024.76 3,986,865.20
715,936.82
27,674,222.46

17,470,435.00 32,252.00 10,595.46

18,491,697.00 5,934.50
251,403.55

17,513,282.46

18,749,035.05

110,055.00 5,000.00
115,055.00
$50,001,171.65

0.00 $46,423,257.51

Annual Financial Report FY 2003 (Version 1.0) 4

Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003
$17,077,141.94
1,763,520.60 5,067,025.39 2,313,704.23 7,447,136.45 2,508,386.12 9,010,454.80 4,692,687.73 1,120,676.28
51,000,733.54
22,628.05
$51,023,361.59

June 30, 2002
$16,148,943.79
1,105,093.71 4,427,276.54 2,147,035.18 5,264,230.96 2,512,166.15
978,930.60 3,934,817.47 15,097,505.58
51,615,999.98
7,155.46
$51,623,155.44

The compensation and employee benefits category increased by approximately $1,320,119.20. The increase reflects a pay raise for the employees of the institution of approximately three percent with the associated fringe benefits. The increase also reflects an increased cost of health insurance for the employees of the institution.
Utilities decreased by approximately ($205,953.87) during the past year. The decrease was primarily associated with the decreased electric rates and efficiencies associated with the replacement of the institution's central chiller.
Under non-operating revenues (expenses) state appropriations decreased by approximately ($1,021,262.00). Reduction of state funding is a direct result of decreased income and sales tax collections during fiscal year 2003.

Statement of Cash Flows
The final statement presented by the Clayton College and State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and
Annual Financial Report FY 2003 (Version 1.0) 5

related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Year Ended June 30, 2003, Condensed

Cash Provided (used) By: Operating Activities Non-capital Financing Activities Investing Activities Capital and Related Financing Activities

June 30, 2003
($17,260,180.54) 17,371,750.85 7,882.00 (1,821,901.74)

Net Change in Cash Cash, Beginning of Year

(1,702,449.43) 2,530,551.35

Cash, End of Year

$828,101.92

Capital Assets
The University had no significant capital additions during fiscal year 2003.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Economic Outlook
The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong. Even with a relatively flat funded year, the University was able to generate a modest increase in Net Assets. The University anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues.
_______________________ Thomas K. Harden, President Clayton College and State University

Annual Financial Report FY 2003 (Version 1.0) 6

Statement of Net Assets

CLAYTON COLLEGE AND STATE UNIVERSITY

STATEMENT OF NET ASSETS

June 30, 2003

June 30, 2003

ASSETS

Current Assets

C ash and C ash Equivalents

$828,101.92

Short-term Investments

310,759.45

Accounts Receivable, net

4,121,357.57

I nv e nto r ie s

323,526.94

Other Assets

14,604.76

Total C urrent Assets

5,598,350.64

Noncurrent Assets Noncurrent C ash I nv e s tm e nts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS

933,603.11 15,015.02
28,393,299.11 29,341,917.24 34,940,267.88

LIA BILIT IE S Current Liabilities
Accounts Payable and Accrued Liabilities D e p o s its Deferred Revenue Other Liabilities Deposits Held for Other Organizations C ompensated Absences (current portion)
Total C urrent Liabilities Noncurrent Liabilities
C ompensated Absences Long-term Liabilities
Total Noncurrent Liabilities TOTAL LIABILITIES

1,388,696.44
653,765.83 89,678.55
(821,463.39) 757,242.29 2,067,919.72
615,159.09
615,159.09 2,683,078.81

NET ASSETS Invested in C apital Assets, net of related debt Restricted for Nonexpendable Expendable C apital Projects Unr e s tr ic te d TOTAL NET ASSETS

28,393,299.11
951,475.89 13,747,093.42
(181,613.06) (10,653,066.29) $32,257,189.07

Annual Financial Report FY 2003 (Version 1.0) 7

Statement of Revenues, Expenses and Changes in Net Assets

CLAYTON COLLEGE AND STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2003
June 30, 2003

REVENUES

Operating Revenues

Student Tuition and Fees

$11,633,476.09

Less: Sponsored and Unsponsored Scholarships

(1,833,416.04)

Federal Appropriations

Federal Grants and Contracts

6,476,047.82

State and Local Grants and Contracts

6,894,042.43

Nongovernmental Grants and Contracts Sales and Services of Educational Departments Auxiliary Enterprises

593,860.96 2,533,122.97 5,336,094.33

Other Operating Revenues

739,605.63

Total Operating Revenues

32,372,834.19

EXPENSES

Operating Expenses

Salaries:

Faculty Staff

10,105,224.68 12,577,635.09

Benefits Other Personal Services

5,427,612.49 4,378.75

Travel

432,841.36

Scholarships and Fellowships

9,503,203.08

Utilities

831,356.66

Supplies and Other Services Depreciation

10,416,607.46 1,701,873.97

Total Operating Expenses

51,000,733.54

Operating Income (loss) NONOPERATING REVENUES (EXPENSES)

(18,627,899.35)

State Appropriations

17,470,435.00

Gifts

32,252.00

Investment Income (endowments, auxiliary and other) Interest Expense (capital assets)

10,595.46 (22,628.05)

Other Nonoperating Revenues

Net Nonoperating Revenues

17,490,654.41

Income before other revenues, expenses, gains, or loss State Capital Appropriations

(1,137,244.94) 110,055.00

Capital Grants and Gifts

5,000.00

Federal Grants & Contracts

State Grants & Contracts

Other Grants and Contracts

Total Other Revenues

115,055.00

Increase in Net Assets NET ASSETS

(1,022,189.94)

Net Assets-beginning of year, as originally reported

33,051,382.42

Cumulative effect of changes in accounting principle

Prior Year Adjustments

227,996.59

Net Assets-beginning of year, restated

33,279,379.01

Net Assets-End of Year

$32,257,189.07

Annual Financial Report FY 2003 (Version 1.0) 8

Statement of Cash Flows
CLAYTON COLLEGE AND STATE UNIVERSITY STATEMENT OF CASH FLOWS
For the Year Ended June 30, 2003
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities
CASH FLOWS FROM NON-CAPITAL F INANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES C apital Grants and Gifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital Debt and Leases Interest Paid on C apital Debt and Leases Net C ash used by C apital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003
$11,633,476.09
18,542,497.07 223,395.60
(17,713,488.86) (34,456,132.76)
(1,833,416.04) (5,849.91) 1,370.30
2,889,323.17 478,629.65
1,520,122.30 374,900.29
1,084,992.56 (17,260,180.54)
17,470,435.00 (130,936.15) 32,252.00
17,371,750.85
(1,821,901.74)
(1,821,901.74)
7,882.00
7,882.00 (1,702,449.43) 2,530,551.35
$828,101.92

Annual Financial Report FY 2003 (Version 1.0) 9

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating Activities
D e pr e c ia tio n C hange in Assets and Liabilities:
Receivables, net Inventories Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($18,627,899.35)
1,701,873.97
(359,294.16) (168,172.17) 342,856.22 (425,973.57)
52,075.23 220,038.99
4,314.30
($17,260,180.54)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current Assets

$828,101.92 $828,101.92

Clayton College and State University had no transactions to report under Non-Cash Investing, Non-Capital Financing, and Capital and Related-Financing Transactions.

Annual Financial Report FY 2003 (Version 1.0) 10

CLAYTON COLLEGE AND STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations Clayton College and State University serves the state, and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity Clayton College and State University is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Clayton College and State University as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Clayton College and State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Clayton College and State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of
Annual Financial Report FY 2003 (Version 1.0) 11

materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
Basis of Accounting For financial reporting purposes, the University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-university transactions have been eliminated.
The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Consumable supplies are carried at the lower of cost or market on either the first-in, first-out ("FIFO") basis.
Annual Financial Report FY 2003 (Version 1.0) 12

Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Clayton College and State University when complete. For the year ended June 30, 2003, GSFIC did not transfer any capital additions to Clayton College and State University.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net
Annual Financial Report FY 2003 (Version 1.0) 13

Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Clayton College and State University reported accrued liability compensated absences in the amount of $1,373,693.87 as of 06-30-2002. For FY2003, this amount was adjusted for FICA and a 360-hour maximum for a reduction of <$5,606.79>. Also in FY2003, $3,204,512.80 was earned in compensated absences and employee payments/adjustments were $3,200,198.50, for a total net decrease of $1,292.49. The ending balance as of 6-30-2003 in accrued liability for compensated absences is $1,372,401.38.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The University's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and
Annual Financial Report FY 2003 (Version 1.0) 14

Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted Total Unrestricted Net Assets

June 30, 2003
$1,028,673.92 299,116.49
(11,980,856.70) ($10,653,066.29)

When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes Clayton College and State University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues The University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the University's financial
Annual Financial Report FY 2003 (Version 1.0) 15

statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships.
Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus Clayton College and State University) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus Clayton College and State University), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Annual Financial Report FY 2003 (Version 1.0) 16

Categorization of Deposits
The University's cash deposits are categorized by risk as follows:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the University or by its agent in the University's name.
Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University's name.
Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the University's name, and amounts uncollateralized.
Cash Deposits as of June 30, 2003

C ash Deposits Investment Portfolio Accounts
Total C ash Deposits

C arrying Amount
$528,924.33

Bank Balances
$0.00

$528,924.33

$0.00

Risk C ategories

1

2

$0.00

$0.00

3 $0.00

$0.00

$0.00

$0.00

Categorization of Investments
The University's investments are categorized as to credit risk within the three categories described below:
Category 1 - Insured or registered, or securities held by the University or its agent in the University's name
Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name.
Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University's name.

Annual Financial Report FY 2003 (Version 1.0) 17

At June 30, 2003, the University's investments consisted of the following:

Ty pe o f Inv e stm e nts
C om m on S tock C o rpo ra te B o nds S e curitie s a nd C o rpo ra te O bliga tio ns

R isk C a te gorie s

1

2

$0.00

$0.00

3 $0.00

C arry ing A m ount
$0.00

To ta ls

$0.00

$0.00

$0.00

$0.00

Inv e stm e nts No t S ubje ct to C a te go riza tio ns: B oa rd of R e ge nts
S ho rt-Te rm Fund B alance d Incom e Fund Tota l R e turn Fund Inv e stm e nt P o rtfolio A ccounts Mutua l Funds R e a l Esta te S ta te Inv e stm e nt P o ol S ho rt-Te rm Inv e stm e nts
To ta l Inv e stm e nts

299,177.59 933,603.11
310,759.45 $1,543,540.15

Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool.
Note 3. Accounts Receivable
Accounts receivable consisted of the following at June 30, 2003.

Student Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal, State, and Private Funds Other
Less Allowance for Doubtful Accounts
Net Accounts Receivable

June 30, 2003
$1,028,889.83 46,174.63
3,249,273.42 42,108.23
4,366,446.11 245,088.54
$4,121,357.57

Annual Financial Report FY 2003 (Version 1.0) 18

Note 4. Inventories

Inventories consisted of the following at June 30, 2003.

B o o k s to r e Food S ervices Physical Plant O th e r
T o ta l

June 30, 2003
$304,571.16 10,845.11
8,110.67 $323,526.94

Note 5. Notes/Loans Receivable
Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2003 and 2002. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The University has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2003 the allowance for uncollectible loans was approximately $4,479.00.

Annual Financial Report FY 2003 (Version 1.0) 19

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2003:

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$640,501.10
640,501.10

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

34,773,705.00 631,565.00
5,730,939.78
41,136,209.78

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

10,505,578.29 473,992.39
4,607,674.66
15,587,245.34

Total Capital Assets, Being Depreciated, Net 25,548,964.44

Capital Assets, net

$26,189,465.54

Additions $0.00 0.00

Reductions $0.00 0.00

Ending Balance 6/30/2003
$640,501.10 0.00
640,501.10

18,998.00 1,482,091.01 4,207,171.22 5,708,260.23

325,547.67 14,653.40
340,201.07

0.00 34,792,703.00
631,565.00 6,887,483.12
0.00 4,192,517.82
0.00 46,504,268.94

958,335.72 23,295.16
516,241.84
3,059,030.51
4,556,903.23
1,151,357.00
$1,151,357.00

1,146,391.40 49,728.76
181,904.08
14,653.40
1,392,677.64

0.00 10,317,522.61
447,558.79 4,942,012.42
0.00 3,044,377.11
0.00 18,751,470.93

(1,052,476.57) 27,752,798.01

($1,052,476.57) $28,393,299.11

Annual Financial Report FY 2003 (Version 1.0) 20

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2003.

P re p a id T uitio n a nd Fe e s Research O the r D e fe rre d R e v e nue
T o ta ls

June 30, 2003 $205,865.43 447,900.40 $653,765.83

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2003 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2002
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2003

$0.00

$0.00

Current Portion
$0.00

Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total

1,373,693.87 3,204,512.80 1,373,693.87 3,204,512.80

3,205,805.29 3,205,805.29

1,372,401.38 0.00
1,372,401.38

757,242.29 757,242.29

Total Long Term Obligations

$1,373,693.87 $3,204,512.80 $3,205,805.29 $1,372,401.38

$757,242.29

(a) The beginning balance includes the amount shown as current in FY2002 and reclassified as long-term in F

Note 9. Lease Obligations
Clayton College and State University is obligated under no operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under no capital leases and installment purchase agreements for the acquisition of real property.

Annual Financial Report FY 2003 (Version 1.0) 21

Note 10. Retirement Plans

Teachers Retirement System Of Georgia

Plan Description Clayton College and State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Clayton College and State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Clayton College and State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$ 1,291,599.45 $ 1,228,263.34 $ 1,594,794.46

Regents Retirement Plan

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.

Funding Policy Clayton College and State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statue and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation.

Annual Financial Report FY 2003 (Version 1.0) 22

Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.
Clayton College and State University and the covered employees made the required contributions of $ 554,662.18 (10.02%) and $268,371.36 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description Clayton College and State University participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $ 162,762.37 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
Clayton College and State University is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Clayton College and State University and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per
Annual Financial Report FY 2003 (Version 1.0) 23

person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Clayton College and State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Clayton College and State University expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Clayton College and State University (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
Note 13. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the
Annual Financial Report FY 2003 (Version 1.0) 24

group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 116 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, Clayton College and State University recognized as incurred $324,377.47 of expenditures, which was net of $30,658.52 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 25

Note 14. Natural Classifications With Functional Classifications The University's operating expenses by functional classification for FY2003 are shown below:

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003
Functional Classification FY2003

Natural Classification

Instruction

Research

Public Service

Academic Support

Faculty Staff B enef it s Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciat io n

$ 9,921,114.35 2,237,662.76 2,496,780.07
346.00 68,534.80 20,720.00 123,627.02 2,203,184.10
5,172.84

$ 0.00

$ 100,967.00 867,289.92 196,620.95
138,107.22
12,117.24 448,418.27

$ 15,187.29 2,388,163.63
501,435.14 87.00
34,703.64
33,074.28 1,576,308.92
518,065.49

Total Expenses

$ 17,077,141.94

$ 0.00

$ 1,763,520.60

$ 5,067,025.39

Student Services
($ 915.03) 1,398,942.34
332,156.23
43,390.28
29,328.61 510,801.80
$ 2,313,704.23

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003

Natural Classification

Institutional Support

Plant Operations & M aintenance

Functional Classification FY2003

Scholarships & Fellowships

Auxiliary Enterprises

Unallo cated Expenses

Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciatio n

$58,908.48 3,326,082.75 1,312,272.09
3,945.75 76,106.46
62,791.58 2,584,238.81
22,790.53

$ 0.00 1,309,558.08
359,858.79 (38,305.40)
709.21
550,729.67 320,337.53
5,498.24

$ 0.00 9,010,454.80

$ 9,962.59 1,049,935.61 228,489.22
38,305.40 71,289.75 472,028.28 19,688.26 2,773,318.03 29,670.59

$ 0.00 1,120,676.28

Total Expenses

$7,447,136.45

$2,508,386.12

$9,010,454.80

$4,692,687.73

$ 1,120,676.28

To tal Expenses
$ 10,105,224.68 12,577,635.09
5,427,612.49 4,378.75
432,841.36 9,503,203.08
831,356.66 10,416,607.46
1,701,873.97
$ 51,000,733.54

Annual Financial Report FY 2003 (Version 1.0) 26

COASTAL GEORGIA COMMUNITY COLLEGE
Financial Report
For the Year Ended June 30, 2003

Coastal Georgia Community College Brunswick, Georgia

President Dr. Dorothy L. Lord

Vice President for Business Affairs Mr. C. Tom Saunders

COASTAL GEORGIA COMMUNITY COLLEGE ANNUAL FINANCIAL REPORT FY 2003
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 7 Statement of Revenues, Expenses and Changes in Net Assets............................................ 8 Statement of Cash Flows ..................................................................................................... 9 Note 1 Summary of Significant Accounting Policies ...................................................... 11 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 16 Note 3 Accounts Receivable............................................................................................. 18 Note 4 Inventories............................................................................................................. 19 Note 5 Notes/Loans Receivable........................................................................................ 19 Note 6 Capital Assets........................................................................................................ 20 Note 7 Deferred Revenue.................................................................................................. 21 Note 8 Long-Term Liabilities ........................................................................................... 21 Note 9 Lease Obligations.................................................................................................. 21 Note 10 Retirement Plans ................................................................................................. 22 Note 11 Risk Management................................................................................................ 23 Note 12 Contingencies...................................................................................................... 24 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 24 Note 14 Natural Classifications With Functional Classifications..................................... 26

COASTAL GEORGIA COMMUNITY COLLEGE
Management's Discussion and Analysis

Introduction

Coastal Georgia Community College is one of the 34 institutions of the University System of Georgia. The College, located in Brunswick, Georgia, was founded in 1961 and has become known for its comprehensive community college mission. The College offers pre-baccalaureate degrees in a wide variety of subjects. Additionally, the College offers career programs. The institution continues to grow as shown by the comparison numbers that follow.

Faculty

Students

FY2003 FY2002 FY2001

56

2,398

57

2,210

57

1,912

Overview of the Financial Statements and Financial Analysis

Coastal Georgia Community College is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2002 and FY 2003.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Coastal Georgia Community College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and noncurrent), and Net Assets (Assets minus Liabilities). The difference between current and noncurrent assets will be discussed in the footnotes to the financial statements.

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major
Annual Financial Report FY 2003 (Version 1.0) 1

categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.
Statement of Net Assets, Condensed

Assets: C urrent Assets C apital Assets, net Other Assets Total Assets
Liabilities: C urrent Liabilities Noncurrent Liabilities Total Liabilities

June 30, 2003
$2,353,501.56 9,807,332.68 2,655.00
12,163,489.24
1,109,441.94 175,123.41
1,284,565.35

June 30, 2002
$1,226,698.80 9,621,918.51 501.75
10,849,119.06
370,940.05
370,940.05

Net Assets: Invested in C apital Assets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects Unrestricted Total Net Assets

9,807,332.68 66,324.98 39,677.66
965,588.57 $10,878,923.89

9,621,918.51 67,270.20
117,316.27
671,674.03 $10,478,179.01

The total assets of the institution increased by $1,314,370.18 However, a review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $185,414.17 of investment in plant, net of accumulated depreciation and $1,150,907.68 due to early registration of students for Fall Semester, a GSFIC receivable for network equipment in Camden County, and setting up a receivable for HOPE funds not received at June 30th. See Note 1 in the notes to the financial statements for additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets. Other asset categories, current and noncurrent, showed a decrease during the year. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction and public service missions of the institution.
The total liabilities for the year increased by $913,625.30. The primary cause for the increase was in current liabilities, primarily due to the above mentioned receivable for HOPE not being reported as a negative liability and $399,931.99 in deferred revenue for early registration for Fall
Annual Financial Report FY 2003 (Version 1.0) 2

Semester. The combination of the increase in total assets of $1,314,370.18 and the increase in total liabilities of $913,625.30 yields an increase in total net assets of $400,744.88. The increase in total net assets is primarily related the change to record HOPE funds due as a receivable rather than a negative liability.
Statement of Revenues, Expenses and Changes in Net Assets
Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.
Statement of Revenues, Expenses and Changes in Net Assets, Condensed

Operating Revenues Operating Expenses Operating Loss
Nonoperating Revenues and Expenses
Income (Loss) Before other revenues, expenses, gains or losses
Other revenues, expenses, gains or losses
Increase in Net Assets
Net Assets at beginning of year, as originally reported C umulative effect of changes in accounting principle Prior Year Adjustments Net Assets at beginning of year, restated
Net Assets at End of Year

June 30, 2003 $8,233,549.55 16,301,585.22 (8,068,035.67)
7,736,899.03
(331,136.64)
(331,136.64) 10,478,179.01
731,881.52 11,210,060.53 $10,878,923.89

June 30, 2002 $7,022,161.68 14,727,587.38 (7,705,425.70)
7,302,570.59
(402,855.11)
(402,855.11) 27,470,089.98 16,589,055.86 10,881,034.12 $10,478,179.01

Annual Financial Report FY 2003 (Version 1.0) 3

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:

Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002
June 30, 2003

Operating Revenue Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Auxiliary Other

$2,144,412.02 4,455,897.63 317,226.39 1,175,236.56 140,776.95

Total Operating Revenue

8,233,549.55

Nonoperating Revenue State Appropriations Gifts Investment Income Grants and Contracts Other

7,733,442.00 2,500.00 957.03

Total Nonoperating Revenue

7,736,899.03

Capital Gifts and Grants State Capital Appropriations Other Capital Gifts and Grants

Total Capital Gifts and Grants

0.00

Total Revenues

$15,970,448.58

June 30, 2002
$1,964,690.47 3,595,793.84 332,696.92 1,018,738.54 110,241.91 7,022,161.68
7,300,745.00 2,500.00 (674.41)
7,302,570.59
0.00 $14,324,732.27

Annual Financial Report FY 2003 (Version 1.0) 4

Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003
$7,393,893.21
184,278.72 949,151.79 1,157,313.11 2,392,341.07 2,005,274.01 1,132,419.42 1,086,923.12
(9.23)
16,301,585.22
$16,301,585.22

June 30, 2002
$6,556,227.70
185,694.12 879,074.66 1,072,397.98 2,134,800.68 1,151,001.99 920,856.92 942,069.42 885,463.91
14,727,587.38
$14,727,587.38

The increase in grants and contracts relates to additional Title IV funding due to increased enrollment, as well as, larger nongovernmental contracts for School to Work and Adult Education.
Revenues associated with student tuition and auxiliary enterprises increased over 15% due to increased enrollment and an increase in tuition charges.
The compensation and employee benefits category increased by approximately $672,914.71. The increase reflects a pay raise for the employees of the institution of approximately three percent with the associated fringe benefits. Additionally, several areas including the Student Services, Plant Operations, and Auxiliary Services had vacancies during FY2002. Health and life insurance contributed to the $236,626.32 increase in benefits. The increase also reflects an increased cost of health insurance for the employees of the institution.
Utilities increased by $18,181.77 during the past year. The increase was primarily associated with the increased use of the College due to enrollment, as well as, higher natural gas prices for fiscal year 2003.
Under non-operating revenues (expenses) state appropriations increased by approximately $432,697.00. While it appears that the institution received a substantial amount of new money from the state, given the mandatory cost increases of various categories of expenses, the College actually had a relatively flat funding year with all things considered.
Annual Financial Report FY 2003 (Version 1.0) 5

Statement of Cash Flows

The final statement presented by the Coastal Georgia Community College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Year Ended June 30, 2003, Condensed

Cash Provided (used) By: Operating Activities Non-capital Financing Activities Investing Activities Capital and Related Financing Activities
Net Change in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2003
($7,385,790.53) 7,718,969.47 957.03 (347,543.71)
(13,407.74) 198,124.90
$184,717.16

Capital Assets

The College had no significant capital asset additions for FY2003. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Economic Outlook

The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is strong. Even with a relatively flat funded year, the College was able to generate a modest increase in Net Assets. The College anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues.

_______________________ Dr. Dorothy L. Lord, President Coastal Georgia Community College

Annual Financial Report FY 2003 (Version 1.0) 6

Statement of Net Assets

C OASTAL GEORGIA C OMMUNITY C OLLEGE

STATEMENT OF NET ASSETS

June 30, 2003

June 30, 2003

ASSETS

Current Assets

C ash and C ash Equivalents

$182,062.16

Short-term Investments

Accounts Receivable, net

1,969,580.83

I nv e n to r ie s

196,232.57

Other Assets

5,626.00

Total C urrent Assets

2,353,501.56

Noncurrent Assets Noncurrent C ash I nv e s tm e n ts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS

2,655.00
9,807,332.68 9,809,987.68 12,163,489.24

LIA BILIT IE S Current Liabilities
Accounts Payable and Accrued Liabilities D e p o s its Deferred Revenue Other Liabilities Deposits Held for Other Organizations C ompensated Absences (current portion)
Total C urrent Liabilities Noncurrent Liabilities
C ompensated Absences Long-term Liabilities
Total Noncurrent Liabilities TOTAL LIABILITIES

335,227.11
404,151.43 (31,245.12) 50,365.87 350,942.65 1,109,441.94
175,123.41
175,123.41 1,284,565.35

NET ASSETS Invested in C apital Assets, net of related debt Restricted for No ne x p e nda b le Ex p e nd a b le C apital Projects U n r e s tr ic te d TOTAL NET ASSETS

9,807,332.68
66,324.98 39,677.66
965,588.57 $10,878,923.89

Annual Financial Report FY 2003 (Version 1.0) 7

Statement of Revenues, Expenses and Changes in Net Assets
COASTAL GEORGIA COMMUNITY COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2003
June 30, 2003

REVENUES

Operating Revenues

Student Tuition and Fees

$3,049,262.58

Less: Sponsored and Unsponsored Scholarships

(904,850.56)

Federal Appropriations

Federal Grants and Contracts

3,087,428.59

State and Local Grants and Contracts

947,628.55

Nongovernmental Grants and Contracts Sales and Services of Educational Departments Auxiliary Enterprises Other Operating Revenues

420,840.49 317,226.39 1,175,236.56 140,776.95

Total Operating Revenues

8,233,549.55

EXPENSES

Operating Expenses

Salaries:

Faculty Staff

3,193,022.68 4,810,441.44

Benefits Other Personal Services

2,236,375.06

Travel Scholarships and Fellowships Utilities

169,548.02 1,190,589.42
474,528.30

Supplies and Other Services Depreciation

3,297,139.29 929,941.01

Total Operating Expenses

16,301,585.22

Operating Income (loss) NONOPERATING REVENUES (EXPENSES)

(8,068,035.67)

State Appropriations

7,733,442.00

Gifts

2,500.00

Investment Income (endowments, auxiliary and other) Interest Expense (capital assets)

957.03

Other Nonoperating Revenues

Net Nonoperating Revenues

7,736,899.03

Income before other revenues, expenses, gains, or loss

(331,136.64)

State Capital Appropriations

Capital Grants and Gifts Federal Grants & Contracts State Grants & Contracts

Other Grants and Contracts

Total Other Revenues

0.00

Increase in Net Assets NET ASSETS

(331,136.64)

Net Assets-beginning of year, as originally reported

10,478,179.01

Cumulative effect of changes in accounting principle

Prior Year Adjustments

731,881.52

Net Assets-beginning of year, restated

11,210,060.53

Net Assets-End of Year

$10,878,923.89

Annual Financial Report FY 2003 (Version 1.0) 8

Statement of Cash Flows
COASTAL GEORGIA COMMUNITY COLLEGE STATEMENT OF CASH FLOWS
For the Year Ended June 30, 2003
CASH F LOWS F ROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities
CASH F LOWS F ROM NON-CAPITAL F INANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities
CASH F LOWS F ROM CAPITAL AND RELATED F INANCING ACTIVITIES C apital Grants and Gifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital Debt and Leases Interest Paid on C apital Debt and Leases Net C ash used by C apital and Related Financing Activities
CASH F LOWS F ROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003
$2,975,495.56
4,403,662.69 318,910.34
(6,207,431.06) (7,965,788.76) (2,095,439.98)
(4,511.00) 3,316.00
986,828.42
153,814.12 10,162.26 35,190.88
(7,385,790.53)
7,733,442.00 (16,972.53) 2,500.00
7,718,969.47
(347,543.71)
(347,543.71)
957.03
957.03 (13,407.74) 198,124.90 $184,717.16

Annual Financial Report FY 2003 (Version 1.0) 9

Statement of Cash Flows, Continued

RECONCILIA T ION OF OPERA T ING LOSS T O NET CA SH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Incom e (loss) A djustm ents to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Ope rating A ctivities
D epreciation C hange in A ssets and Liabilities:
Receivables, net I n v e n to r ie s Other A ssets A ccounts Payable Deferred Revenue Other Liabilities C om pensated A bse nces
Net C ash Provided (used) by Operating A ctivities

($8,068,035.67)
929,941.01
(650,997.11) 6,949.76 1,594.17
(67,377.13) 397,641.06 (17,790.78)
82,284.16
($7,385,790.53)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent A ssets C ash and C ash Equivalents C lassified as Non-curre nt A ssets

$182,062.16 2,655.00
$184,717.16

** NON-C ASH INVESTING, NON-C APITAL FINANC ING, AND C APITAL AND RELATED FINANC ING TRANSAC TIONS

C hange in fair v alue of investm e nts re cognized as a com ponent of interest i

($945.22)

Annual Financial Report FY 2003 (Version 1.0) 10

COASTAL GEORGIA COMMUNITY COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations Coastal Georgia Community College serves the state, and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity Coastal Georgia Community College is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Coastal Georgia Community College as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Coastal Georgia Community College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Coastal Georgia Community College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the College is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of
Annual Financial Report FY 2003 (Version 1.0) 11

materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
Basis of Accounting For financial reporting purposes, the College is considered a special-purpose government engaged only in business-type activities. Accordingly, the College's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-college transactions have been eliminated.
The College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The College accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Consumable supplies are valued at cost using the average-cost basis. Resale Inventories are valued at cost using the average-cost basis.
Annual Financial Report FY 2003 (Version 1.0) 12

Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the College's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Coastal Georgia Community College when complete. For the year ended June 30, 2003, GSFIC transferred no capital additions to Coastal Georgia Community College.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a College residence hall.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net
Annual Financial Report FY 2003 (Version 1.0) 13

Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Coastal Georgia Community College had accrued liability for compensated absences in the amount of $443,781.90 as of 7-1-2002. For FY2003, $380,853.94 was earned in compensated absences and employees were paid $332,519.09, for a net increase of $48,334.85. Additionally, $33,949.31 was added to the additions as an adjustment for failing to include FICA and FICA/Medicare in the 7-1-2002 total. The ending balance as of 6-30-2003 in accrued liability for compensated absences is $526,066.06.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The College's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and
Annual Financial Report FY 2003 (Version 1.0) 14

Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted Total Unrestricted Net Assets

June 30, 2003
$415,034.78 819,952.37 21,000.00 (290,398.58)
$965,588.57

When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes Coastal Georgia Community College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the College, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees
Annual Financial Report FY 2003 (Version 1.0) 15

and other student charges, the College has recorded contra revenue for sponsored and unsponsored scholarships.
Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus Coastal Georgia Community College) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus Coastal Georgia Community College), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Annual Financial Report FY 2003 (Version 1.0) 16

Categorization of Deposits

The College's cash deposits are categorized by risk as follows:

Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the College or by its agent in the College's name.

Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the College's name.

Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the College's name, and amounts uncollateralized.

Cash Deposits as of June 30, 2003
C arrying Amount

C ash Deposits Investment Portfolio Accounts

$90,227.04

Total C ash Deposits

$90,227.04

Bank Balances
$833,216.09
$833,216.09

Risk C ategories

1

2

$833,216.09

$0.00

3 $0.00

$833,216.09

$0.00

$0.00

Categorization of Investments
The College's investments are categorized as to credit risk within the three categories described below:
Category 1 - Insured or registered, or securities held by the College or its agent in the College's name
Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the College's name.
Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the College's name.

Annual Financial Report FY 2003 (Version 1.0) 17

At June 30, 2003, the College's investments consisted of the following:

Type of Investm ents
C om m on S tock C orporate Bonds S ecurities and C orporate O bligations

Risk C ategories

1

2

$0.00

$0.00

3 $0.00

T o ta ls

$0.00

$0.00

$0.00

C arrying Amount
$0.00 0.00 0.00
$0.00

Investm ents Not S ubject to C ategorizations: B oard of R egents
S hort-Term Fund Balanced Income Fund Total Return Fund Investm ent Portfolio A ccounts Mutual Funds R eal Estate S tate Investm e nt Pool S hort-Term Investm ents
Total Investm ents

84,990.12 $84,990.12

Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the College did not own any specific, identifiable investment securities of the pool.

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2003.

June 30, 2003

S tudent Tuition and Fees A uxiliary Enterprises and Other Operating A ctivities Fede ral, S tate , and Private Funds O the r
Less A llowance for D oubtful A ccounts

$590,298.49 153,016.47 595,334.44 630,931.43
1,969,580.83

Net A ccounts Receivable

$1,969,580.83

Annual Financial Report FY 2003 (Version 1.0) 18

Note 4. Inventories

Inventories consisted of the following at June 30, 2003.

B oo k store Food Services Physical Plant O the r
T o ta l

June 30, 2003 $163,358.49
32,874.08 $196,232.57

Note 5. Notes/Loans Receivable
Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2003 and 2002. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the College for amounts cancelled under these provisions. As the College determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The College has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2003 the allowance for uncollectible loans was $0.00.

Annual Financial Report FY 2003 (Version 1.0) 19

Note 6. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2003.

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$1,578,016.36 0.00
1,578,016.36

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

998,920.00 12,933,781.00
600,318.00 2,887,116.89
0.00 1,664,794.78
0.00 19,084,930.67

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

592,508.71 6,576,251.06
509,354.91 2,203,719.62
0.00 1,159,194.22
0.00 11,041,028.52

Total Capital Assets, Being Depreciated, Net 8,043,902.15

Capital Assets, net

$9,621,918.51

Additions $0.00 0.00

Reductions $0.00 0.00

Ending Balance 6/30/2003
$1,578,016.36 0.00
1,578,016.36

229,193.80 118,349.91 347,543.71

32,431.62 3,774.36
36,205.98

998,920.00 12,933,781.00
600,318.00 3,083,879.07
0.00 1,779,370.33
0.00 19,396,268.40

298,936.36 115,982.17 414,918.53 (67,374.82) ($67,374.82)

18,263.08 210,154.11
24,371.80 32,431.62
3,774.36
288,994.97
(252,788.99)
($252,788.99)

574,245.63 6,366,096.95
484,983.11 2,470,224.36
0.00 1,271,402.03
0.00 11,166,952.08
8,229,316.32
$9,807,332.68

Annual Financial Report FY 2003 (Version 1.0) 20

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2003.

P re pa id T uitio n a nd Fe e s Research O the r D e fe rre d R e v e nue
T o ta ls

June 30, 2003 $381,376.50 22,774.93 $404,151.43

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2003.

Leases Lease Obligations

Beginning Balance July 1, 2002
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2003

$0.00

$0.00

Current Portion
$0.00

Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total

443,781.90 443,781.90

414,803.25 414,803.25

332,519.09 332,519.09

526,066.06 0.00
526,066.06

350,942.65 350,942.65

Total Long Term Obligations

$443,781.90 $414,803.25

$332,519.09 $526,066.06

$350,942.65

(a) The beginning balance includes the amount shown as current in FY2002 and reclassifed as long-term in FY2003.

Note 9. Lease Obligations
Coastal Georgia Community College is not obligated under any operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is not obligated under capital leases and installment purchase agreements for the acquisition of real property. No future commitments exist.
CAPITAL LEASES
The College has no capital leases.
OPERATING LEASES
The College has no operating leases.
Annual Financial Report FY 2003 (Version 1.0) 21

Note 10. Retirement Plans

Teachers Retirement System Of Georgia

Plan Description Coastal Georgia Community College participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Coastal Georgia Community College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Coastal Georgia Community College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$ 430,091.25 $ 427,017.62 $ 499,240.62

Regents Retirement Plan

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.

Funding Policy Coast Georgia Community College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation.

Annual Financial Report FY 2003 (Version 1.0) 22

Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.
Coastal Georgia Community College and the covered employees made the required contributions of $ 245,532.88 (10.02%) and $ 122,521.88 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description Coastal Georgia Community College participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $ 35,289.35 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
Coastal Georgia Community College is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Coastal Georgia Community College and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per
Annual Financial Report FY 2003 (Version 1.0) 23

person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Coastal Georgia Community College, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Coastal Georgia Community College expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Coastal Georgia Community College (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
Note 13. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the
Annual Financial Report FY 2003 (Version 1.0) 24

group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 58 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, Coastal Georgia Community College recognized as incurred $ 154,334.19 of expenditures, which was net of $ 56,521.58 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 25

Note 14. Natural Classifications With Functional Classifications The College's operating expenses by functional classification for FY2003 are shown below:

Natural C lassification
Faculty Staff B enefits P erso nal Services Travel Scho larships and Fello wships Utilities Supplies and Others Services Depreciatio n
To tal Expenses

Functional Classification FY2003

Instruction

Research

Public Service

Academic Support

$ 3,324,621.83 1,628,564.86 1,118,310.14

$ 0.00

($ 131,923.00) 197,807.54 11,298.50

$ 0.00 489,206.39
119,580.14

69,993.11

659.64

15,318.12

91,078.10 1,139,913.67
21,411.50

69,959.66 36,476.38

4,845.88 204,219.09 115,982.17

$ 7,393,893.21

$ 0.00

$ 184,278.72

$ 949,151.79

Student Services
$ 323.85 651,500.09 166,907.19
28,923.50 6,170.00 11,442.05
290,785.43 1,261.00
$ 1,157,313.11

Natural Classification
Faculty Staff B enef it s Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciat io n
Total Expenses

Institut io nal Suppo rt

Functional Classification FY2003

P lant

Operatio ns

Scho larships

A uxiliary

& M aintenance

& Fello wships

Enterprises

Unallo cated Expenses

$ 0.00 1,193,179.33 623,133.93
34,157.31
20,413.70 518,880.80
2,576.00

$ 0.00 515,121.30 160,797.14 (16,217.13)
592.41
274,177.55 292,579.97 778,222.77

$ 0.00 1,132,419.42

$ 0.00 135,061.93 36,348.02
16,217.13 19,903.93 52,000.00
2,611.36 814,283.95
10,496.80

$ 0.00 (9.23)

$ 2,392,341.07

$ 2,005,274.01

$ 1,132,419.42

$ 1,086,923.12

($ 9.23)

To tal Expenses
$ 3,193,022.68 4,810,441.44 2,236,375.06 0.00 169,548.02 1,190,589.42 474,528.30 3,297,139.29 929,941.01
$ 16,301,585.22

Annual Financial Report FY 2003 (Version 1.0) 26

COLUMBUS STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2003

Columbus State University Columbus, Georgia

President Frank D. Brown

Vice President for Business & Finance Charles D. Pattillo

COLUMBUS STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2003
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 7 Statement of Revenues, Expenses and Changes in Net Assets............................................ 8 Statement of Cash Flows ..................................................................................................... 9 Note 1 Summary of Significant Accounting Policies ...................................................... 11 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 16 Note 3 Accounts Receivable............................................................................................. 18 Note 4 Inventories............................................................................................................. 19 Note 5 Notes/Loans Receivable........................................................................................ 19 Note 6 Capital Assets........................................................................................................ 20 Note 7 Deferred Revenue.................................................................................................. 21 Note 8 Long-Term Liabilities ........................................................................................... 21 Note 9 Lease Obligations.................................................................................................. 21 Note 10 Retirement Plans ................................................................................................. 22 Note 11 Risk Management................................................................................................ 24 Note 12 Contingencies...................................................................................................... 25 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 25 Note 14 Natural Classifications With Functional Classifications..................................... 26

COLUMBUS STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Columbus State University is one of the 34 institutions of the University System of Georgia. The University, located in Columbus, Georgia, was founded in 1958 and has become known for its state-of-the-art technology and technology-related programs. The University offers baccalaureate and masters degrees in a wide variety of subjects. This wide range of educational opportunities attracts a highly qualified faculty and a student body of more than 6,000 students each year. The institution continues to grow as shown by the comparison numbers that follow.

Faculty

Students

FY2003 FY2002 FY2001

218

6,250

219

5,552

219

5,019

Overview of the Financial Statements and Financial Analysis

Columbus State University is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2002 and FY 2003.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Columbus State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements.

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major
Annual Financial Report FY 2003 (Version 1.0) 1

categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets

June 30, 2003
$17,963,591.39 38,005,684.39 1,011,299.67 56,980,575.45

June 30, 2002
$10,137,692.11 38,098,086.55 2,248,091.81 50,483,870.47

Lia b ilitie s : C urre nt Liabilities Noncurrent Liabilities Total Liabilities

10,545,525.98 1,040,565.93
11,586,091.91

5,038,861.73 691,110.34
5,729,972.07

Net A ssets: Invested in C apital A ssets, ne t of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets

38,009,397.53 1,650,830.49 2,220,247.54
3,514,007.98 $45,394,483.54

38,069,183.69 1,540,434.90 2,182,582.54
2,961,697.27 $44,753,898.40

The total assets of the institution increased by $6,496,704.98. However, a review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $5,035,700.38 in net accounts receivables. Furthermore, cash and cash equivalents increased by $4,579,337.79, which include Trusco Reserves. Many of the other asset categories, current and noncurrent, showed a decrease during the year. See Note 1 in the notes to the financial statements for information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution.
The total liabilities for the year increased by $5,856,119.84. The primary cause for the increase was in deferred revenue in the amount of $5,810,232.63. The increase is a direct result of fee assessment for fall semester occurring in earlier months. The combination of the increase in total assets of $6,496,704.98 and the increase in total liabilities of $5,856,119.84 yields an increase in
Annual Financial Report FY 2003 (Version 1.0) 2

total net assets of $640,585.14. The increase in total net assets is primarily in the category of unrestricted net assets.

Statement of Revenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30, 2003

Operating Revenues Operating Expenses Operating Loss

$39,791,765.54 67,253,472.09 (27,461,706.55)

Nonoperating Revenues and Expenses

26,538,275.65

Incom e (Loss) B efore other revenues, expenses, gains or losses

(923,430.90)

Other revenues, expenses, gains or losses

Increase in Net Assets

(923,430.90)

Net Assets at beginning of year, as originally reported C um ulative effect of changes in accounting principle Prior Year Adjustm ents Net Assets at beginning of year, restated

44,753,898.40
1,564,016.04 46,317,914.44

Net Assets at End of Year

$45,394,483.54

June 30, 2002 $18,270,083.24
52,962,419.62 (34,692,336.38) 27,607,485.48
(7,084,850.90) 5,150,780.33 (1,934,070.57) 93,493,462.52 46,805,493.55 46,687,968.97 $44,753,898.40

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:
Annual Financial Report FY 2003 (Version 1.0) 3

Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

Operating Revenue Tuition and Fees Grants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O th e r
Total Operating Revenue
Nonoperating Revenue State Appropriations G ifts Investment Incom e Grants and C ontracts O th e r
Total Nonoperating Revenue
C apital Gifts and G rants State C apital Appropriations Other C apital G ifts and Grants
Total C apital G ifts and G rants
Total Revenues

June 30, 2003

June 30, 2002

$7,581,780.08 26,521,346.69
1,364,225.28 4,087,106.34
237,307.15
39,791,765.54

$8,817,174.02 4,538,030.90 1,231,438.75 3,435,904.54 247,535.03
18,270,083.24

26,393,296.85 149,518.09 (4,539.29)
26,538,275.65

27,359,995.67 164,381.91 85,409.11
5,134,430.33
32,744,217.02

0.00 $66,330,041.19

16,350.00 16,350.00 $51,030,650.26

Annual Financial Report FY 2003 (Version 1.0) 4

Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003 $23,417,958.63
4,926,257.76 3,311,506.26 6,782,107.03 5,701,845.33 17,138,634.26 3,281,893.78 2,693,269.04 67,253,472.09
$67,253,472.09

June 30, 2002 $23,331,457.76
4,863,040.01 3,235,344.80 8,741,422.23 7,164,248.76 2,993,164.42 2,633,741.64
52,962,419.62
2,301.21 $52,964,720.83

The compensation and employee benefits category increased by approximately $1,620,574.51. The increase reflects an increased cost of health insurance for the employees of the institution.
Utilities increased by approximately $28,428.84 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2003.
Under non-operating revenues (expenses) state appropriations increased by approximately ($966,698.82).
Statement of Cash Flows
The final statement presented by the Columbus State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.
Annual Financial Report FY 2003 (Version 1.0) 5

Cash Flows for the Year Ended June 30, 2003, Condensed

C ash Provided (used) By: Operating A ctivities Non-capital Financing Activities Investing Activities C apital and Related Financing A ctivities
Net C hange in C ash C ash, Beginning of Year
C ash, End of Year

June 30, 2003
($ 2 2 ,6 1 4 ,3 4 5 .2 8 ) 2 6 ,1 4 7 ,0 6 9 .6 7 1 4 ,0 4 5 .7 4 (7 8 5 ,9 6 3 .1 5 )
2 ,7 6 0 ,8 0 6 .9 8 7 ,3 0 2 ,7 0 7 .9 2
$ 1 0 ,0 6 3 ,5 1 4 .9 0

Capital Assets
The University had no significant capital asset additions for facilities in fiscal year 2003.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Economic Outlook
The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong. The University anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues.
_______________________ Frank D. Brown, President Columbus State University

Annual Financial Report FY 2003 (Version 1.0) 6

Statement of Net Assets

C OLUMBUS STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2003
ASSETS Current Assets C ash and C ash Equivalents S hort-term Investm ents A ccounts Receivable, net I n v e n to r ie s Othe r A ssets Total C urrent A ssets

June 30, 2003
$10,063,514.90 7,620,689.02 279,387.47
17,963,591.39

Noncurrent Assets Noncurrent C ash Investm ents Notes Receivable, net C apital A ssets, net Total Noncurrent A ssets TOTAL ASSETS

290,292.96 721,006.71 38,005,684.39 39,016,984.06 56,980,575.45

LIA BILIT IE S Current Liabilities
A ccounts Payable and A ccrued Liabilities D eposits Deferred Revenue Othe r Liabilities D eposits Held for Othe r Organizations C om pensated A bsences (current portion)
Total C urrent Liabilities Noncurrent Liabilities
C om pensated A bsences Long-term Liabilities
Total Noncurrent Liabilities TOTAL LIABILITIES

289,764.71 149,025.00 9,212,470.76
79,861.81 383,511.21 430,892.49 10,545,525.98
1,037,355.64 3,210.29
1,040,565.93 11,586,091.91

NET ASSETS Invested in C apital A ssets, net of related debt Restricted for No ne x p e nd a b le Ex p e nd a b le C apital Projects U n r e s tr ic te d TOTAL NET ASSETS

38,009,397.53
1,650,830.49 2,220,247.54
3,514,007.98 $45,394,483.54

Annual Financial Report FY 2003 (Version 1.0) 7

Statement of Revenues, Expenses and Changes in Net Assets

C OLUMBUS STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, a nd C HANGES in NET ASSETS
for the Y ear Ende d June 30, 2003
June 30, 2003

RE VE NU E S

O pe rating R e v e nue s

S tude nt Tuition a nd Fe e s

$13,472,482.28

Less: Sponsored and Unsponsored Scholarships

(5,890,702.20)

Federal A ppropriations Federal G rants and C ontracts S tate and Local G rants and C ontracts Nongov e rnm e ntal G rants and C ontracts

23,101,179.77 776,210.94
2,643,955.98

S ale s and S e rv ice s of Educational D e partm e nts

1,364,225.28

A uxiliary Enterprise s

4,087,106.34

O ther O perating Revenue s

237,307.15

Total O perating Revenues

39,791,765.54

E XPE NS E S

O pe rating Ex pe nse s

S a la rie s :

Fa c u lty S taff

13,946,218.74 14,532,447.39

B enefits O ther Personal S ervices

7,605,253.87 13,350.00

Travel

436,127.91

Scholarships and Fellowships

17,689,820.76

U tilitie s

2,153,350.85

S upplie s and O the r S e rv ice s D e pre ciation

8,024,939.17 2,851,963.40

Total O pe rating Ex pe nse s

67,253,472.09

O pe rating Incom e (loss) NONOPERA T ING REVE NUES (EXPENSES)

(27,461,706.55)

S ta te A ppropria tions

26,393,296.85

G ifts

Inv e stm e nt Incom e (e ndowm e nts, aux iliary and othe r) Inte re st Ex pe nse (ca pita l a sse ts)

149,518.09

O ther Nonoperating Revenues Ne t Nonope rating R e v e nue s Incom e before other revenues, expenses, gains, or loss
S tate C apital A ppro priations

(4,539.29) 26,538,275.65
(923,430.90)

C apital G rants and G ifts

Federal G rants & C ontracts

S ta te G ra nts & C ontracts

O the r G rants and C ontracts

Total O ther Revenues

0.00

Increase in Net A ssets NET ASSETS

(923,430.90)

Ne t A sse ts-be ginning of y e ar, as originally re porte d

44,753,898.40

C um ulativ e e ffe ct of change s in acco unting principle

Prior Year A djustm ents

1,564,016.04

Ne t A sse ts-be ginning of y e ar, re state d

46,317,914.44

Ne t A sse ts-End of Ye ar

$45,394,483.54

Annual Financial Report FY 2003 (Version 1.0) 8

Statement of Cash Flows
COLUMBUS STATE UNIVERSITY STATEMENT OF C ASH FLOWS For the Year Ended June 30, 2003
CASH F LOWS F ROM OPE RATING A CTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales and Services of Educational D epartments Paym ents to Suppliers Paym ents to Em ployees Paym ents for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Em ployees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities
CASH F LOWS F ROM NON- CAPITA L F INANCING ACTIVIT IE S State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing A ctivities
CASH F LOWS F ROM CAPIT AL AND RELATED F INA NCING A CTIVITIES C apital Grants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities
CASH F LOWS F ROM INVESTING ACT IVITIES Proceeds from Sales and Maturities of Investments Interest on Investm ents Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003
$18,102,695.02
11,229,168.71 1,396,248.32
(18,377,069.66) (28,459,818.65)
(6,962,979.96) (667,345.12) 636,077.59
1,779,618.00 149,443.13 128,533.46 226,094.68 282,874.51
1,455,308.30 64,687.97
(3,597,881.58) (22,614,345.28)
26,393,296.85 (246,227.18)
26,147,069.67
(773,666.66) (12,296.49)
(785,963.15)
14,045.74
14,045.74 2,760,806.98 7,302,707.92 $10,063,514.90

Annual Financial Report FY 2003 (Version 1.0) 9

Statement of Cash Flows, Continued
RECONCILIATION OF OPERA TING LOSS TO NET CASH PROVIDE D (USED) BY OPERATING A CTIVITIES:
Operating Incom e (loss) A djustments to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating Activities
D epreciation C hange in Assets and Liabilities:
Receivables, net I n v e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($27,461,706.55)
3,000,418.30
(4,797,405.88) 55,480.54 37,643.05
107,389.92 6,336,388.59
31,890.31 75,556.44
($22,614,345.28)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current A ssets

$10,063,514.90 $10,063,514.90

Columbus State University had no transactions to report under Non-Cash Investing, Non-Capital Financing, and Capital and Related-Financing Transactions.

Annual Financial Report FY 2003 (Version 1.0) 10

COLUMBUS STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations Columbus State University serves the state, and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity Columbus State University is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Columbus State University as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Columbus State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Columbus State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of
Annual Financial Report FY 2003 (Version 1.0) 11

materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
Basis of Accounting For financial reporting purposes, the University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-university transactions have been eliminated.
The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Consumable supplies are carried at cost on the weighted average basis.
Annual Financial Report FY 2003 (Version 1.0) 12

Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Columbus State University when complete. For the year ended June 30, 2003, there were no GSFIC transfers.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues,
Annual Financial Report FY 2003 (Version 1.0) 13

Expenses, and Changes in Net Assets. Columbus State University had accrued liability for compensated absences in the amount of $1,392,691.69 as of 7-1-2002. For FY2003, $2,898,003.80 was earned in compensated absences and employees were paid $2,822,447.36, for a net increase of $75,556.44. The ending balance as of 6-30-2003 in accrued liability for compensated absences is $1,468,248.13.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The University's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.
Annual Financial Report FY 2003 (Version 1.0) 14

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Reserve Reserve for Encumbrances Reserve for Inventory O ther Unrestricted Total Unre stricted Net A ssets

June 30, 2003
$0.00 24,097.93 269,959.68 3,219,950.37 $3,514,007.98

When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes Columbus State University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues The University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships.

Annual Financial Report FY 2003 (Version 1.0) 15

Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus Columbus State University) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus Columbus State University), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Annual Financial Report FY 2003 (Version 1.0) 16

Categorization of Deposits
The University's cash deposits are categorized by risk as follows:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the University or by its agent in the University's name.
Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University's name.
Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the University's name, and amounts uncollateralized.
Cash Deposits as of June 30, 2003

Cash Deposits Investment Portfolio Accounts
Total Cash Deposits

C arrying Amount
$10,063,514.90

Bank Balances
$9,967,936.49

Risk Categories

1

2

3

$100,000.00

$0.00 $9,867,936.49

$10,063,514.90 $9,967,936.49 $100,000.00

$0.00 $9,867,936.49

Categorization of Investments
The University's investments are categorized as to credit risk within the three categories described below:
Category 1 - Insured or registered, or securities held by the University or its agent in the University's name
Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name.
Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University's name.

Annual Financial Report FY 2003 (Version 1.0) 17

At June 30, 2003, the University's investments consisted of the following:

Type of Investm ents

Risk C ategories

1

2

C om m on S tock
C orporate Bonds S ecurities and C orporate O bligations

$263,462.09 5,000.00

$0.00 21,444.32
386.55

3 $0.00

C arrying Amount
$263,462.09 21,444.32 5,386.55

T o ta ls

$268,462.09

$21,830.87

$0.00

$290,292.96

Investm ents Not S ubject to C ategorizations: B oard of R egents
S hort-Term Fund Balanced Income Fund Total Return Fund Investm ent Portfolio A ccounts Mutual Funds R eal Estate S tate Investm e nt Pool S hort-Term Investm ents
Total Investm ents

$290,292.96

Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool.

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2003.

June 30, 2003

S tudent Tuition and Fees A uxiliary Enterprises and Other Operating A ctivities Fede ral, S tate , and Private Funds O the r
Less A llowance for D oubtful A ccounts

$389,836.98 1,459,858.59
585,849.58 5,187,018.78 7,622,563.93
1,874.91

Net A ccounts Receivable

$7,620,689.02

Annual Financial Report FY 2003 (Version 1.0) 18

Note 4. Inventories Columbus State University had no inventories as of June 30, 2003 Note 5. Notes/Loans Receivable Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2003 and 2002. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education.
Annual Financial Report FY 2003 (Version 1.0) 19

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2003.

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$1,821,881.30
1,821,881.30

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

1,524,544.00 49,472,902.69
2,945,631.00 6,421,814.82
47,000.00 6,784,229.00
67,196,121.51

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

695,425.13 18,146,831.72
1,800,993.18 4,213,347.90
7,833.33 6,055,485.00
0.00 30,919,916.26

Total Capital Assets, Being Depreciated, Net 36,276,205.25

Capital Assets, net

$38,098,086.55

Additions $111,066.25
111,066.25

Reductions $111,066.25
111,066.25

Ending Balance 6/30/2003
$1,821,881.30 0.00
1,821,881.30

78,450.25 679,164.05
94,502.61 852,116.91

78,450.25 395,849.64
474,299.89

1,524,544.00 49,472,902.69
2,945,631.00 6,705,129.23
47,000.00 6,878,731.61
0.00 67,573,938.53

85,451.93 1,261,704.95
137,392.11 693,673.61
822,195.70
3,000,418.30
(2,148,301.39)
($2,037,235.14)

106,539.07 1,909,383.09
160,002.39 354,274.57
2,530,199.12 (2,055,899.23) ($1,944,832.98)

674,337.99 17,499,153.58
1,778,382.90 4,552,746.94
7,833.33 6,877,680.70
0.00 31,390,135.44
36,183,803.09
$38,005,684.39

Annual Financial Report FY 2003 (Version 1.0) 20

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2003.
June 30, 2003

Prepaid Tuition and Fees Research O the r D eferred Re venue

$8,932,109.45 280,361.31

T o ta ls

$9,212,470.76

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2003 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total
Total Long Term Obligations

Beginning Balance July 1, 2002
$28,902.86

Additions $0.00

Reductions

Ending Balance June 30, 2003

$12,296.49

$16,606.37

1,392,691.69 2,898,003.80 1,392,691.69 2,898,003.80

2,822,447.36 2,822,447.36

1,468,248.13 0.00
1,468,248.13

$1,421,594.55 $2,898,003.80 $2,834,743.85 $1,484,854.50

Current Portion $13,396.08
430,892.49 430,892.49 $444,288.57

Note 9. Lease Obligations
The capital lease is payable in monthly installments and has terms expiring in various years between 2003 and 2005. Expenditures for fiscal year 2003 were $12,296.49 of which $759.16 represented interest. The principal paid on the capital lease was $11,537.33 for the fiscal year ended June 30, 2003. The interest rate is 6.58 percent. The carrying value of the capital lease at June 30, 2003 is $35,250.00
The capital lease provides for renewal and/or purchase option. Generally purchase options at bargain price of one dollar are exercisable at the expiration of the least terms.

Annual Financial Report FY 2003 (Version 1.0) 21

SUMMARY OF LEASE OBLIGATIONS
Future commitments for the capital lease have remaining terms in excess of one year as of June 30, 2003, were as follows:

Year Ending June 30:

Year

2004

1

2005

2

2006

3

2007

4

2008

5

2009 through 2011

6-10

2012 through 2018

11-15

2019 through 2023

16-20

2024 through 2028

21-25

2029 through 2033

26-30

2034 through 2038

31-35

2039 through 2043

36-40

Total m inim um lease paym ents

Less: Interest

Less: Executory costs (if paid)

Principal O utstanding

Real Property

C apital Lease s

Operating Leases

$13,396.08 4,465.36

17,861 1,255.07
0.00 $16,606.37

$0.00

Note 10. Retirement Plans
Teachers Retirement System Of Georgia
Plan Description Columbus State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.
Funding Policy Employees of Columbus State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Columbus State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees.
Annual Financial Report FY 2003 (Version 1.0) 22

Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$1,796,294.59 $1,800,031.65 $2,231,998.28

Regents Retirement Plan

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.

Funding Policy Columbus State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statue and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.

Columbus State University and the covered employees made the required contributions of $626,511.47 (10.02%) and $312,631.89 (5%), respectively.

Georgia Defined Contribution Plan

Plan Description Columbus State University participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.

Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of
Annual Financial Report FY 2003 (Version 1.0) 23

Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $89,860.79 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
Columbus State University is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Columbus State University and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Columbus State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of
Annual Financial Report FY 2003 (Version 1.0) 24

Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Columbus State University expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Columbus State University (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
Note 13. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals.
As of June 30, 2003, there were 205 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, Columbus State University recognized as incurred $694,342.72 of expenditures, which was net of $304,124.32 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 25

Note 14. Natural Classifications With Functional Classifications The University's operating expenses by functional classification for FY2003 are shown below:

St at ement of Operat ing Expenses - Nat ural vs Func t ional Classific at ions For t he Fisc al Y ear Ended June 30, 2003
Func t ional Classific at ion FY 2003

Natural C lassification

I n s tr u c tio n

Research

Public S e r v ic e

A c a d e m ic Support

F ac ult y Staff B enefits P erso nal Services T rav el Scho lars hips and F ello wships Ut ilit ies Supplies and Others Services Depreciatio n

$ 13,915,020.57 3,325,464.76 3,802,431.27
154,400.67
248,192.98 1,954,289.96
18,158.42

$ 0.00

$ 0.00

$ 31,198.17 2,940,422.38
703,498.09
51,940.37 1,828.00
109,362.18 848,681.30 239,327.27

T o tal Expenses

$ 23,417,958.63

$ 0.00

$ 0.00

$ 4,926,257.76

S tu d e n t S e r v ic e s
$ 0.00 2,203,819.01
509,321.45
55,173.78 1,200.00
58,957.59 479,669.93
3,364.50
$ 3,311,506.26

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003

Natural Classification

Institutional Support

Plant Operations & Maintenance

Functional Classification FY2003

Scholarships & Fellowships

Auxiliary Enterprises

Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation

$0.00 3,621,100.90 1,921,931.32
13,350.00 12,375.16
500.00 223,682.71 969,445.97
19,720.97

$0.00 1,786,948.49
514,035.09
3,188.09
1,461,872.01 2,058,413.45
(122,611.80)

$0.00 17,138,634.26

$0.00 654,691.85 154,036.65
159,049.84 547,658.50
51,283.38 1,714,438.56
735.00

Total Expenses

$6,782,107.03

$5,701,845.33

$17,138,634.26

$3,281,893.78

Unallocated Expenses $0.00
2,693,269.04 $2,693,269.04

Total Expenses
$13,946,218.74 14,532,447.39 7,605,253.87
13,350.00 436,127.91 17,689,820.76 2,153,350.85 8,024,939.17 2,851,963.40
$67,253,472.09

Annual Financial Report FY 2003 (Version 1.0) 26

DALTON STATE COLLEGE
Financial Report
For the Year Ended June 30, 2003

Dalton State College Dalton, Georgia

President Dr. James A. Burran

Vice President for Fiscal Affairs Mr. Thomas E. Godbee

DALTON STATE COLLEGE ANNUAL FINANCIAL REPORT
FY 2003
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 7 Statement of Revenues, Expenses and Changes in Net Assets............................................ 8 Statement of Cash Flows ..................................................................................................... 9 Note 1 Summary of Significant Accounting Policies ...................................................... 11 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 16 Note 3 Accounts Receivable............................................................................................. 18 Note 4 Inventories............................................................................................................. 18 Note 5 Notes/Loans Receivable........................................................................................ 18 Note 6 Capital Assets........................................................................................................ 19 Note 7 Deferred Revenue.................................................................................................. 20 Note 8 Long-Term Liabilities ........................................................................................... 20 Note 9 Lease Obligations.................................................................................................. 20 Note 10 Retirement Plans ................................................................................................. 21 Note 11 Risk Management................................................................................................ 22 Note 12 Contingencies...................................................................................................... 23 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 23 Note 14 Natural Classifications With Functional Classifications..................................... 25

DALTON STATE COLLEGE
Management's Discussion and Analysis

Introduction

Dalton State College is one of the 34 institutions of the University System of Georgia. The College, located in Dalton, Georgia, was opened in 1967 and has become known for its technical, transfer, health-related, and business programs. The College offers technical, associate, and targeted baccalaureate degrees. This wide range of educational opportunities attracts a highly qualified faculty and a growing student body. Student enrollment increased from fall '01 to fall '02 by 13.38 percent. The institution continues to grow as shown by the comparison numbers that follow.

Faculty

Students

FY2003 FY2002 FY2001

113

4,135

103

3,647

104

3,139

Overview of the Financial Statements and Financial Analysis

Dalton State College is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2002 and FY 2003.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Dalton State College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements.

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major
Annual Financial Report FY 2003 (Version 1.0) 1

categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

Assets: C urrent Assets C apital Assets, net Other Assets Total Assets

June 30, 2003
$4,779,108.01 21,145,225.49
25,924,333.50

June 30, 2002
$4,519,354.12 21,311,040.01
25,830,394.13

Liabilities: C urrent Liabilities Noncurrent Liabilities Total Liabilities

2,172,748.43 151,722.14
2,324,470.57

2,122,707.77 2,122,707.77

Net Assets: Invested in C apital Assets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects Unrestricted Total Net Assets

21,145,225.49
45,932.16
2,408,705.28 $23,599,862.93

19,159,982.78 21,318.94
4,526,384.64 $23,707,686.36

The total assets of the institution increased by $93,939.37. A review of the Statement of Net Assets will reveal that the increase was primarily due to FY 2003 routine operations with no significant changes. See Note 1 in the notes to the financial statements for additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution.
The total liabilities for the year increased by $201,762.80 with $151,722.14 in the Non-current Liabilities category. This is the re-classification of Compensated Absences. The combination of the increase in total assets of $93,939.37 and the increase in total liabilities of $201,762.80 yields a decrease in total net assets of ($107,823.43); again, relatively no change for FY 2003.

Annual Financial Report FY 2003 (Version 1.0) 2

Statement of Revenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30, 2003

Operating Revenues Operating Expenses Operating Loss

$11,110,234.97 26,013,026.96 (14,902,791.99)

Nonoperating Revenues and Expenses

10,524,032.44

Income (Loss) Before other revenues, expenses, gains or losses

(4,378,759.55)

Other revenues, expenses, gains or losses

Increase in Net Assets

(4,378,759.55)

Net Assets at beginning of year, as originally reported C umulative effect of changes in accounting principle Prior Year Adjustments Net Assets at beginning of year, restated

23,707,686.36
4,270,936.12 27,978,622.48

Net Assets at End of Year

$23,599,862.93

June 30, 2002 $9,690,998.26 23,460,517.47 (13,769,519.21) 10,395,632.07
(3,373,887.14) 3,576,707.38
202,820.24 37,469,054.53 13,964,188.41 23,504,866.12 $23,707,686.36

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a slight decrease of $(107,823.43) in the net assets at the end of the year from FY 2002. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:

Annual Financial Report FY 2003 (Version 1.0) 3

Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

Operating Revenue Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Auxiliary Other
Total Operating Revenue
Nonoperating Revenue State Appropriations Gifts Investment Income Grants and Contracts Other
Total Nonoperating Revenue
Capital Gifts and Grants State Capital Appropriations Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

June 30, 2003

June 30, 2002

$2,733,446.38 6,435,308.87 349,550.67 1,529,237.13 62,691.92
11,110,234.97

$2,433,781.30 5,452,642.31 381,573.47 1,365,796.86 57,204.32
9,690,998.26

10,402,521.28 41,636.16 79,875.00
10,524,032.44

11,534,841.00 89,849.28
(1,229,058.21) 10,395,632.07

0.00 $21,634,267.41

3,576,707.38 3,576,707.38 $23,663,337.71

Annual Financial Report FY 2003 (Version 1.0) 4

Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003 $11,842,546.59
1,680.25 1,642,464.42 1,509,163.53 2,773,981.72 3,627,065.05 3,222,226.14 1,393,899.26
26,013,026.96
$26,013,026.96

June 30, 2002 $11,231,603.53
2,613.99 1,788,294.43 1,517,526.16 2,687,392.02 2,458,000.92 2,557,475.84 1,217,610.58
23,460,517.47
$23,460,517.47

The compensation and employee benefits category increased by approximately $713,714.87. The increase reflects a pay raise for the employees of the institution of approximately three and onequarter percent with the associated fringe benefits. The increase also reflects the rising employer cost of health and life insurance.
Utilities, (including telephone), increased by approximately $78,515.00 during the past year. The increase was primarily associated with the increased natural gas costs, new building square footage, and rising electrical rates that were experienced in fiscal year 2003.
Under non-operating revenues (expenses) state appropriations decreased by approximately ($1,132,319.72). While it appears that the institution received a lesser amount of new money from the state, increased internal income actually offset some of this decrease. Special Funding Initiative, Endowed Chair, of $500,000 for FY 2002 and MRR of $349,968 for FY 2002 were not funded for FY 2003.
Statement of Cash Flows
The final statement presented by the Dalton State College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The
Annual Financial Report FY 2003 (Version 1.0) 5

third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Year Ended June 30, 2003, Condensed

Cash Provided (used) By: Operating Activities Non-capital Financing Activities Investing Activities Capital and Related Financing Activities
Net Change in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2003
($9,850,072.22) 9,967,187.73 41,636.16 (360,429.53)
(201,677.86) 2,810,702.14
$2,609,024.28

Capital Assets
The College had no significant capital asset additions for facilities in fiscal year 2003.
Economic Outlook
The College is aware of the economic outlook that may have an effect on the financial position or results of operations during the upcoming fiscal year. The College's overall financial position for FY 2003 was strong, even with budget reductions. The College anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the College's ability to react to internal and external economic issues.
______________________ James A. Burran, President Dalton State College

Annual Financial Report FY 2003 (Version 1.0) 6

Statement of Net Assets
DALTON STATE COLLEGE STATEMENT OF NET ASSETS
June 30, 2003
ASSETS Current Assets C ash and C ash Equivalents Short-term Investments Accounts Receivable, net I nv e nto r ie s Other Assets Total C urrent Assets
Noncurrent Assets Noncurrent C ash I nv e s tm e nts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS
LIA BILIT IE S Current Liabilities Accounts Payable and Accrued Liabilities D e po s its Deferred Revenue Other Liabilities Deposits Held for Other Organizations C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES

June 30, 2003
$2,609,024.28 1,957,673.69 271,961.71 (59,551.67) 4,779,108.01
21,145,225.49 21,145,225.49 25,924,333.50
681,576.70 1,110,067.92
0.00 56,794.43 324,309.38 2,172,748.43 151,722.14 151,722.14 2,324,470.57

NET ASSETS Invested in C apital Assets, net of related debt Restricted for Nonexpendable Expendable C apital Projects Unrestricted TOTAL NET ASSETS

21,145,225.49
45,932.16 2,408,705.28 $23,599,862.93

Annual Financial Report FY 2003 (Version 1.0) 7

Statement of Revenues, Expenses and Changes in Net Assets

DALTON STATE COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2003
June 30, 2003

REVENUES

Operating Revenues

Student Tuition and Fees

$4,754,111.02

Less: Sponsored and Unsponsored Scholarships

(2,020,664.64)

Federal Appropriations

Federal Grants and Contracts

4,388,571.02

State and Local Grants and Contracts

1,524,620.84

Nongovernmental Grants and Contracts

522,117.01

Sales and Services of Educational Departments

349,550.67

Auxiliary Enterprises

1,529,237.13

Other Operating Revenues

62,691.92

Total Operating Revenues

11,110,234.97

EXPENSES

Operating Expenses

Salaries:

Faculty Staff

6,436,141.62 5,184,411.52

Benefits Other Personal Services

3,175,842.41

Travel

119,731.22

Scholarships and Fellowships

3,222,226.14

Utilities

635,122.97

Supplies and Other Services

5,373,297.61

Depreciation

1,866,253.47

Total Operating Expenses

26,013,026.96

Operating Income (loss) NONOPERATING REVENUES (EXPENSES)

(14,902,791.99)

State Appropriations

10,402,521.28

Gifts

Investment Income (endowments, auxiliary and other) Interest Expense (capital assets)

41,636.16

Other Nonoperating Revenues

79,875.00

Net Nonoperating Revenues

10,524,032.44

Income before other revenues, expenses, gains, or loss

(4,378,759.55)

State Capital Appropriations

Capital Grants and Gifts

Federal Grants & Contracts

State Grants & Contracts

Other Grants and Contracts

Total Other Revenues

0.00

Increase in Net Assets NET ASSETS

(4,378,759.55)

Net Assets-beginning of year, as originally reported

23,707,686.36

Cumulative effect of changes in accounting principle

Prior Year Adjustments

4,270,936.12

Net Assets-beginning of year, restated

27,978,622.48

Net Assets-End of Year

$23,599,862.93

Annual Financial Report FY 2003 (Version 1.0) 8

Statement of Cash Flows
DALTON STATE COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2003
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities
CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES C apital Grants and Gifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital Debt and Leases Interest Paid on C apital Debt and Leases Net C ash used by C apital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003 $4,741,892.68
6,338,214.31 361,830.22
(8,092,191.81) (11,614,240.81)
(3,222,226.14)
1,334,339.53 208,374.47
93,935.33 (9,850,072.22) 9,894,922.23
(15,430.92) 87,696.42 9,967,187.73
(360,429.53)
(360,429.53)
41,636.16 41,636.16 (201,677.86) 2,810,702.14 $2,609,024.28

Annual Financial Report FY 2003 (Version 1.0) 9

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating Activities
Depreciation C hange in Assets and Liabilities:
Receivables, net Inventories Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($14,902,791.99)
1,866,253.47
(718,541.32) (16,006.47)
3,947,519.53 125,510.03 (231,996.03)
79,980.56
($9,850,072.22)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current Assets

$2,609,024.28 $2,609,024.28

Dalton State College had no transactions to report under Non-Cash Investing, Non-Capital Financing, and Capital and Related-Financing Transactions.

Annual Financial Report FY 2003 (Version 1.0) 10

DALTON STATE COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations Dalton State College serves the Northwest region of the state by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Northwest Georgia.
Reporting Entity Dalton State College is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Dalton State College as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Dalton State College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Dalton State College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the College is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of
Annual Financial Report FY 2003 (Version 1.0) 11

materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity occurs.
Basis of Accounting For financial reporting purposes, the College is considered a special-purpose government engaged only in business-type activities. Accordingly, the College's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-college transactions have been eliminated.
The College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more. Generally, these funds are not readily available and there is a penalty for early withdrawal.
Investments The College accounts for its investments at fair market value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. Currently, the College does not have investments, only short-term CD's or Local Government Investment Pool deposits. The DSC Foundation handles and manages all endowments, donations, etc.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grants and contracts.
Inventories Consumable supplies are inventoried at cost, on a first-in, first-out (FIFO) basis. Resale Inventories for the Bookstore and Food Services are inventoried at cost.
Annual Financial Report FY 2003 (Version 1.0) 12

Non-current Cash and Investments Cash and investments that are externally restricted to purchase or construct capital or other noncurrent assets and cannot be used to pay current liabilities are classified as non-current assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the College's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Dalton State College when complete. For the year ended June 30, 2003, there were no GSFIC transfers.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain Continuing Education activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Dalton State College had accrued liability for compensated absences in the amount of $ 404,289.94 as of 7-1-2002. For FY2003, $369,474.38 was earned and employees were paid $297,732.80, for an over-all net increase of $71,741.58.
Annual Financial Report FY 2003 (Version 1.0) 13

The ending balance as of 6-30-2003 in accrued liability for compensated absences is $476,031.52.
Non-current Liabilities Non-current liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets. DSC did not have any capital lease obligations for FY 2003.
Net Assets The College's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Auxiliary Enterprises are not eligible for state appropriations.
Annual Financial Report FY 2003 (Version 1.0) 14

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted Total Unrestricted Net Assets

June 30, 2003
$549,135.32 774,789.56 42,101.91
1,042,678.49 $2,408,705.28

When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes Dalton State College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans; DSC does not have institutional student loans.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the College, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for sponsored and unsponsored scholarships.

Annual Financial Report FY 2003 (Version 1.0) 15

Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus Dalton State College) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus Dalton State College), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Annual Financial Report FY 2003 (Version 1.0) 16

Categorization of Deposits
The College's cash deposits are categorized by risk as follows:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair market value) held by the College or by its agent in the College's name.
Category 2 - Amounts collateralized with securities (at fair market value) held by the pledging financial institution's trust department or agent in the College's name.
Category 3 - Amounts collateralized with securities (at fair market value) held by the pledging financial institution, or by its trust department or agent but not in the College's name, and amounts uncollateralized.
Cash Deposits as of June 30, 2003

Cash Deposits Investment Portfolio Accounts
Total Cash Deposits

C arrying Amount
$1,672,387.34 936,636.94
$2,609,024.28

Bank Balances
$1,672,387.34 936,636.94
$2,609,024.28

Risk Categories

1

2

$1,672,387.34 936,636.94

$0.00

$2,609,024.28

$0.00

3 $0.00

Categorization of Investments
The College's investments are categorized as to credit risk within the three categories described below:
Category 1 - Insured or registered, or securities held by the College or its agent in the College's name
Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the College's name.
Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the College's name.
Dalton State College had no investments as of June 30, 2003

Annual Financial Report FY 2003 (Version 1.0) 17

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2003.

June 30, 2003

S tudent Tuition and Fees A uxiliary Enterprises and Other Operating A ctivities Fede ral, S tate , and Private Funds O the r
Less A llowance for D oubtful A ccounts

$978,305.90 50,767.76
507,599.05 421,000.98 1,957,673.69

Net A ccounts Receivable

$1,957,673.69

Note 4. Inventories

Inventories consisted of the following at June 30, 2003.

B o o k s to re Fo o d S e rv ic e s P h y s ic a l P la n t O th e r
T o ta l

June 30, 2003
$ 2 1 9 ,0 1 4 .4 2 1 0 ,8 4 5 .3 8 3 5 ,1 6 8 .0 4 6 ,9 3 3 .8 7
$ 2 7 1 ,9 6 1 .7 1

Note 5. Notes/Loans Receivable/Student Receivables
As the College determines that receivables are uncollectible, the College has provided a reserve for uncollectible receivables, which, in management's opinion, is sufficient to absorb uncollectible receivables. At June 30, 2003 the allowance for uncollectible receivables was $17,126.15. DSC will during FY 2004 incorporate the new Senate Bill 73 guidelines where appropriate.

Annual Financial Report FY 2003 (Version 1.0) 18

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2003.

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$72,465.30 21,940.87 94,406.17

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

1,346,095.00 22,437,770.98
1,172,871.00 3,049,032.42
4,059,391.00
32,065,160.40

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

954,548.34 6,720,129.62
915,078.65 1,343,285.95
915,484.00
10,848,526.56

Total Capital Assets, Being Depreciated, Net 21,216,633.84

Capital Assets, net

$21,311,040.01

Additions $0.00 0.00

Reductions
$0.00 21,940.87 21,940.87

Ending Balance 6/30/2003
$72,465.30 0.00
72,465.30

292,694.16 204,823.51 497,517.67

355,175.89 9,217.00
364,392.89

1,346,095.00 22,437,770.98
1,172,871.00 2,986,550.69
0.00 4,254,997.51
0.00 32,198,285.18

41,083.81 700,190.64
29,626.24 424,178.78
189,952.00
1,385,031.47
(887,513.80)
($887,513.80)

100,891.93 674,830.73
97,696.03 225,397.35
9,217.00
1,108,033.04

894,740.22 6,745,489.53
847,008.86 1,542,067.38
0.00 1,096,219.00
0.00 11,125,524.99

(743,640.15) 21,072,760.19

($721,699.28) $21,145,225.49

Annual Financial Report FY 2003 (Version 1.0) 19

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2003.

P re p a id T uitio n a nd Fe e s Research O the r D e fe rre d R e v e nue
T o ta ls

June 30, 2003 $936,438.67 173,629.25
$ 1 ,1 1 0 ,0 6 7 .9 2

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2003 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2002
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2003

$0.00

$0.00

Current Portion
$0.00

Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total

404,289.94 404,289.94

369,474.38 369,474.38

297,732.80 297,732.80

476,031.52 0.00
476,031.52

324,309.38 324,309.38

Total Long Term Obligations

$404,289.94 $369,474.38

$297,732.80 $476,031.52

$324,309.38

(a) The beginning balance includes the amount shown as current in FY2002 and reclassified as long-term in FY2003.

Note 9. Lease Obligations
Dalton State College had only one lease obligation, real estate for instructional use, $34,029 annual payment. This is a year-by-year lease with monthly payments of $2,835.75.
CAPITAL LEASES
Dalton State College did not have any capital leases for FY 2003.
OPERATING LEASES
Dalton State College had only one lease for FY 2003. Leased facility for instructional classes; $2,835.75/month, year-by-year lease, $34,029 annual lease.

Annual Financial Report FY 2003 (Version 1.0) 20

Note 10. Retirement Plans

Teachers Retirement System Of Georgia

Plan Description Dalton State College participates in the Teachers Retirement System of Georgia (TRS), a costsharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Dalton State College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Dalton State College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$740,006.73 $748,619.66 $880,099.95

Regents Retirement Plan

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.

Funding Policy Dalton State College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statue and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation. Employees contribute 5% of their

Annual Financial Report FY 2003 (Version 1.0) 21

earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times.
Dalton State College and the covered employees made the required contributions of $242,847.08 (10.02%) and $121,181.58 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description Dalton State College participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $43,278.50 which represents 7.50% of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
Dalton State College is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Dalton State College and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue
Annual Financial Report FY 2003 (Version 1.0) 22

Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Dalton State College, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Dalton State College expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Dalton State College (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003. Dalton State College may have one EEOC alleged complaint within our custodial department. The college has communicated with the legal affairs department of the Regents System Office.
Note 13. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible
Annual Financial Report FY 2003 (Version 1.0) 23

for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 54 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, Dalton State College recognized as incurred $158,475.05 of expenditures, which was net of $70,923.12 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 24

Note 14. Natural Classifications With Functional Classifications The College's operating expenses by functional classification for FY2003 are shown below:

Statement of Operating Expenses - Natural vs Func tional Classific ations For the Fisc al Year Ended June 30, 2003
Func tional Classific ation F Y 2003

Natural C lassification

Instruction

Research

Public Service

Academic Support

F ac ult y Staff B enefits P erso nal Services T rav el Scho larships and Fello wships Utilities Supplies and Others Services Depreciatio n

$ 6,436,141.62 1,608,277.96 1,928,906.74
87,831.06
124,585.93 1,443,113.61 213,689.67

$ 0.00

$ 0.00 1,680.25

$ 0.00 607,387.60 156,492.02
4,595.49
9,218.89 674,818.42 189,952.00

To tal Expenses

$ 11,842,546.59

$ 0.00

$ 1,680.25

$ 1,642,464.42

Student Services
$ 0.00 720,220.07 202,036.88
17,187.60
20,613.90 547,713.38
1,391.70
$ 1,509,163.53

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003

Natural Classification

Institutio nal Suppo rt

P lant Operations & M aintenance

Functional Classification FY2003

Scho larships & Fellowships

Auxiliary Enterprises

Unallocated Expenses

Faculty Staff B enefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciat io n

$0.00 1,478,961.25 654,569.34
7,706.64
20,265.59 610,288.25
2,190.65

$ 0.00 602,648.49 190,355.92
558.94
456,782.91 927,494.47 1,449,224.32

$ 0.00 3,222,226.14

$ 0.00 166,916.15 43,481.51
1,851.49
3,655.75 1,168,189.23
9,805.13

$0.00

Total Expenses

$ 2,773,981.72

$ 3,627,065.05

$ 3,222,226.14

$ 1,393,899.26

$0.00

To t al Expenses
$ 6,436,141.62 5,184,411.52 3,175,842.41 0.00 119,731.22 3,222,226.14 635,122.97 5,373,297.61 1,866,253.47
$26,013,026.96

Annual Financial Report FY 2003 (Version 1.0) 25

Darton College
Financial Report
For the Year Ended June 30, 2003

Darton College Albany, Georgia

Peter J. Sireno
President

Ronnie A. Henry
Vice President for Business and Financial Services

Darton College
ANNUAL FINANCIAL REPORT FY 2003
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 7 Statement of Revenues, Expenses and Changes in Net Assets............................................ 8 Statement of Cash Flows ..................................................................................................... 9 Note 1 Summary of Significant Accounting Policies ...................................................... 11 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 16 Note 3 Accounts Receivable............................................................................................. 18 Note 4 Inventories............................................................................................................. 18 Note 5 Notes/Loans Receivable........................................................................................ 18 Note 6 Capital Assets........................................................................................................ 19 Note 7 Deferred Revenue.................................................................................................. 20 Note 8 Long-Term Liabilities ........................................................................................... 20 Note 9 Lease Obligations.................................................................................................. 21 Note 10 Retirement Plans ................................................................................................. 22 Note 11 Risk Management................................................................................................ 23 Note 12 Contingencies...................................................................................................... 24 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 24 Note 14 Natural Classifications With Functional Classifications..................................... 26

Darton College
Management's Discussion and Analysis

Introduction

Darton College is one of the 34 institutions of the University System of Georgia. The College, located in Albany, Georgia, was founded in 1963 and has become known for its state-of-the-art technology and technology-related programs. Additionally, the College is widely recognized as the leader in allied health training in Southwest Georgia. The College offers associates degrees and certificates in a wide variety of subjects. This diverse range of educational opportunities attracts a highly qualified faculty and a student body of more than 3,300 students. The institution continues to grow as shown by the comparison numbers that follow.

Faculty

Students

FY2003 FY2002 FY2001

64

3,356

65

3,179

61

2,805

Overview of the Financial Statements and Financial Analysis

Darton College presents its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2002.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year (June 30, 2003). The Statement of Net Assets is a point-of-time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Darton College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements.

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

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Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets

June 30, 2003
$3,538,723.19 12,671,794.87
16,210,518.06

June 30, 2002
$3,446,026.11 12,223,142.65
15,669,168.76

Lia b ilitie s : C urre nt Liabilities Noncurrent Liabilities Total Liabilities

1,613,573.76 269,072.70
1,882,646.46

1,870,185.95 1,870,185.95

Net A ssets: Invested in C apital A ssets, ne t of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets

12,671,794.87
1,165,646.89
490,429.84 $14,327,871.60

12,127,214.35
30,799.79 62,659.28 1,578,309.39 $13,798,982.81

The total assets of the institution increased by $541,349.30. However, a review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $448,652.220 of investment in plant, net of accumulated depreciation. See Note 1 in the notes to the financial statements for additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets. Current Assets also showed an increase during the year. The acquisition of assets follows the institutional philosophy to provide modern equipment and resources to the students, faculty, and staff of the institution.
The total liabilities for the year increased by $12,460.51. There was relatively no material change in liabilities for the College between FY 2002 and FY2003. For FY 2003 however, we have presented $269,072.70 as a Noncurrent liability compared to $0.00 for FY 2002. This amount corresponds to the future long-term requirement for compensated absences. The combination of the increase in total assets of $541,349.30 and the increase in total liabilities of
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$12,460.51 yields an increase in total net assets of $528,888.79. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt in the amount of $544,850.52.

Statement of Revenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30, 2003

Operating Revenues Operating Expenses Operating Loss

$11,966,921.80 23,784,170.78 (11,817,248.98)

Nonoperating Revenues and Expenses

11,419,810.94

Incom e (Loss) B efore other revenues, expenses, gains or losses

(397,438.04)

Other revenues, expenses, gains or losses

5,485.00

Increase in Net Assets

(391,953.04)

Net Assets at beginning of year, as originally reported C um ulative effect of changes in accounting principle Prior Year Adjustm ents Net Assets at beginning of year, restated

13,798,982.81
920,841.83 14,719,824.64

Net Assets at End of Year

$14,327,871.60

June 30, 2002 $9,634,628.48 21,412,657.51 (11,778,029.03) 11,176,912.62
(601,116.41) 15,000.00
(586,116.41) 36,404,612.59 22,019,513.37 14,385,099.22 $13,798,982.81

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:

Revenue by Source

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For the Years Ended June 30, 2003 and June 30, 2002

Operating Revenue Tuition and Fees G rants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O th e r
Total Operating Revenue
Nonoperating Revenue State Appropriations G ifts Investment Incom e Grants and C ontracts O th e r
Total Nonoperating Revenue
C apital Gifts and G rants State C apital Appropriations Other C apital G ifts and G rants
Total C apital Gifts and G rants
Total Revenues

June 30, 2003

June 30, 2002

$3,304,858.51 6,244,120.25 215,356.25 2,049,525.84 153,060.95
11,966,921.80

$2,746,022.11 4,589,095.77 295,294.87 1,791,837.53 212,378.20
9,634,628.48

11,377,660.28 16,123.77 26,026.89
11,419,810.94

11,681,549.00 18,561.48 43,543.80
(566,741.66)
11,176,912.62

5,485.00 5,485.00 $23,392,217.74

15,000.00 15,000.00 $20,826,541.10

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Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003
$8,171,928.32 5,223.14 3,784.74
1,943,837.28 1,568,293.40 2,629,840.26 2,275,359.97 4,654,913.20 1,813,123.48
717,866.99
23,784,170.78
$23,784,170.78

June 30, 2002 $8,524,630.84
1,599,880.96 1,660,018.45 2,464,205.15 1,984,078.37 3,515,482.84 1,664,360.90
21,412,657.51
$21,412,657.51

Grants and contracts increased in the amount of approximately $1,655,024.48. This increase is important to the College as the amount of state appropriations may decline in the future due to increased budget cuts.
The compensation and employee benefits category increased by approximately $843,856.16. The increase reflects a slight increase in the number of employees at the institution as well as a significant increase in the cost of health benefits for all employees.
Utilities increased by approximately $157,881.94 during the past year. The increase was primarily associated with an increase in the overall cost of electricity and telephone usage. Additional utility expense was incurred due to the construction of the new PE Building.
Under non-operating revenues state appropriations decreased by approximately ($303,888.72). The majority of this decrease was due to the budget cuts mandated by the state legislature because of the continued reduction in state tax revenues.
Statement of Cash Flows
The final statement presented by the Darton College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second
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section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Year Ended June 30, 2003, Condensed

C ash Provided (used) By: Operating Activities Non-capital Financing A ctivities Investing Activities C apital and Related Financing Activities
Net C hange in C ash C ash, Beginning of Year
C ash, End of Year

June 30, 2003
($ 1 0 ,8 5 6 ,2 0 4 .7 6 ) 1 1 ,4 0 8 ,9 4 4 .6 7 2 6 ,0 2 6 .8 9 (3 1 3 ,5 3 3 .9 0 )
2 6 5 ,2 3 2 .9 0 1 ,1 8 2 ,9 6 3 .8 9
$ 1 ,4 4 8 ,1 9 6 .7 9

Capital Assets
The College did not have any significant capital asset additions for facilities in fiscal year 2003. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Economic Outlook
The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is strong. Even with less funding, the College was able to generate a modest increase in Net Assets. The College anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues.

____________________ Peter J. Sireno, President Darton College

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Statement of Net Assets
DARTON C OLLEGE STATEMENT OF NET ASSETS
June 30, 2003
ASSETS Current Assets C ash and C ash Equivalents S hort-term Investm ents A ccounts Receivable, net I n v e n to r ie s Othe r A ssets Total C urrent A ssets
Noncurrent Assets Noncurrent C ash Investm ents Notes Receivable, net C apital A ssets, net Total Noncurrent A ssets TOTAL ASSETS
LIA BILIT IE S Current Liabilities A ccounts Payable and A ccrued Liabilities D eposits Deferred Revenue Othe r Liabilities D eposits Held for Othe r Organizations C om pensated A bsences (current portion) Total C urrent Liabilities Noncurrent Liabilities C om pensated A bsences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES

June 30, 2003
$1,448,196.79 1,912,948.06 177,578.34 3,538,723.19
12,671,794.87 12,671,794.87 16,210,518.06
953,804.54 305,505.19 (78,988.33) 116,206.73 317,045.63 1,613,573.76 269,072.70 269,072.70 1,882,646.46

NET ASSETS Invested in C apital A ssets, net of related debt Restricted for No ne x p e nd a b le Ex p e nd a b le C apital Projects U n r e s tr ic te d TOTAL NET ASSETS

12,671,794.87
1,165,646.89 490,429.84
$14,327,871.60

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Statement of Revenues, Expenses and Changes in Net Assets

DARTO N C O LLE GE STATEMENT of REV E NUES, EX PENSES, a nd C H ANGES in NET ASSE TS
for the Y e a r Ende d June 30, 2003

June 30, 2003

RE VE NU E S

O pe ra ting R e v e nue s

S tude nt Tuitio n a nd Fe e s

$5,027,530.58

Less: S ponsored and Unsponsored S cholarships

(1,722,672.07)

Fe de ra l A ppropria tions

Fe de ra l G ra nts a nd C ontra cts

4,973,681.58

S ta te a nd Lo ca l G ra nts a nd C o ntra cts

241,107.47

No ngo v e rnm e nta l G ra nts a nd C o ntra cts

1,029,331.20

S a le s a nd S e rv ice s o f Educa tio na l D e pa rtm e nts

215,356.25

A ux ilia ry Ente rprise s

2,049,525.84

O the r O pe ra ting R e v e nue s

153,060.95

Tota l O pe ra ting R e v e nue s

11,966,921.80

E XPE NS E S

O pe ra ting Ex pe nse s

S alaries:

Fa culty S ta ff

5,873,813.52 5,528,070.59

B e ne fits O the r P e rsona l S e rv ice s

2,999,591.63 1,296.00

Travel

145,178.28

S cholarships and Fellowships

3,054,651.13

Utilitie s

817,224.64

S upplie s a nd O the r S e rv ice s D e pre cia tio n

4,550,543.16 813,801.83

T o ta l O pe ra ting Ex pe nse s

23,784,170.78

O pe ra ting Inco m e (lo ss) NONOPERA T ING REVE NUES (EXPENSES)

(11,817,248.98)

S ta te A ppro pria tio ns

11,377,660.28

G ifts

16,123.77

Inv e stm e nt Inco m e (e ndo wm e nts, a ux ilia ry a nd o the r) Inte re st Ex pe nse (ca pita l a sse ts)

26,026.89

O the r Nonope ra ting R e v e nue s

Ne t No no pe ra ting R e v e nue s

11,419,810.94

Incom e be fore othe r re v e nue s, e x pe nse s, ga ins, or loss

(397,438.04)

S ta te C a pita l A ppro pria tio ns

C a pita l G ra nts a nd G ifts

5,485.00

Fe de ra l G ra nts & C ontra cts

S ta te G ra nts & C o ntra cts

O the r G ra nts a nd C o ntra cts

Tota l O the r R e v e nue s

5,485.00

Incre a se in Ne t A sse ts NET ASSETS

(391,953.04)

Ne t A sse ts-be ginning o f y e a r, a s o rigina lly re po rte d

13,798,982.81

C um ula tiv e e ffe ct o f cha nge s in a cco unting principle

P rior Ye a r A djustm e nts

920,841.83

Ne t A sse ts-be ginning o f y e a r, re sta te d

14,719,824.64

Ne t A sse ts-End o f Ye a r

$14,327,871.60

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Statement of Cash Flows
DARTON COLLEGE STATEMENT OF C ASH FLOWS For the Year Ended June 30, 2003
CASH F LOWS F ROM OPE RATING A CTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales and Services of Educational D epartments Paym ents to Suppliers Paym ents to Em ployees Paym ents for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Em ployees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities
CASH F LOWS F ROM NON- CAPITA L F INANCING ACTIVIT IE S State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing A ctivities
CASH F LOWS F ROM CAPIT AL AND RELATED F INA NCING A CTIVITIES C apital Grants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities
CASH F LOWS F ROM INVESTING ACT IVITIES Proceeds from Sales and Maturities of Investments Interest on Investm ents Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003
$3,304,858.51
6,244,120.25 215,356.25
(8,402,653.42) (11,322,881.05)
(3,054,651.13)
1,431,186.32 151,228.08 12,478.17
416,064.09 38,658.96
110,030.21 (10,856,204.76)
11,377,660.28 15,160.62 16,123.77
11,408,944.67
(302,933.05) (10,600.85)
(313,533.90)
26,026.89
26,026.89 265,232.90 1,182,963.89 $1,448,196.79

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Statement of Cash Flows, Continued
RECONCILIATION OF OPERA TING LOSS TO NET CASH PROVIDE D (USED) BY OPERATING A CTIVITIES:
Operating Incom e (loss) A djustments to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating Activities
D epreciation C hange in Assets and Liabilities:
Receivables, net I n v e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($11,817,248.98)
813,801.83
899,081.70 (51,314.22)
168,886.51 (843,200.25)
(27,874.41) 1,663.06
($10,856,204.76)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current A ssets

$1,448,196.79 $1,448,196.79

Darton College had no transactions to report under Non-Cash Investing, Non-Capital Financing, and Capital and Related-Financing Transactions.

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DARTON COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations Darton College serves the state, and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity Darton College is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Darton College as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Darton College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Darton College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of
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materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
Basis of Accounting For financial reporting purposes, the College is considered a special-purpose government engaged only in business-type activities. Accordingly, the College's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-college transactions have been eliminated.
The college has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The college has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The College has no investments, and as such, is in compliance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Consumable supplies are carried at the lower of cost or market on either the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis.
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Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the College's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Darton College when complete. For the year ended June 30, 2003, GSFIC did not transfer any capital additions to Darton College.
Deposits Darton College has no housing units on its campus requiring deposits.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Darton College had accrued liability for compensated
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absences in the amount of $584,455.27 as of 7-1-2002. For FY2003, $1,329,444.15 was earned in compensated absences and employees were paid $1,327,781.09, for a net increase of $1,663.06. The ending balance as of 6-30-2003 in accrued liability for compensated absences is $586,118.33.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The College's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.
Annual Financial Report FY 2003 (Version 1.0) 14

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Reserve Reserve for Encumbrances Reserve for Inventory O ther Unrestricted Total Unre stricted Net A ssets

June 30, 2003
$455,149.68 732,891.41 126,370.18 (823,981.43)
$490,429.84

When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes Darton College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for sponsored and unsponsored scholarships.

Annual Financial Report FY 2003 (Version 1.0) 15

Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus Darton College) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies, which allow agencies of the State of Georgia (and thus Darton College), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Annual Financial Report FY 2003 (Version 1.0) 16

Categorization of Deposits
The College's cash deposits are categorized by risk as follows:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the College or by its agent in the College's name.
Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the College's name.
Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the College's name, and amounts uncollateralized.
Cash Deposits as of June 30, 2003

Cash Deposits Investment Portfolio Accounts
Total Cash Deposits

C arrying Amount $1,448,196.79
$1,448,196.79

Bank Balances
$2,231,032.66 0.00
$2,231,032.66

Risk Categories

1

2

$665,471.61 $1,565,561.05

$665,471.61 $1,565,561.05

3 $0.00
$0.00

Categorization of Investments
The College's investments are categorized as to credit risk within the three categories described below:
Category 1 - Insured or registered, or securities held by the College or its agent in the College's name
Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the College's name.
Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the College's name.
At June 30, 2003, the College had no investments.

Annual Financial Report FY 2003 (Version 1.0) 17

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2003.

S tudent Tuition and Fees A uxiliary Enterprises and Other Operating A ctivities Fede ral, S tate , and Private Funds O the r
Less A llowance for D oubtful A ccounts

June 30, 2003
$95,170.94 187,294.96 1,029,493.51 594,040.01 1,905,999.42
(6,948.64)

Net A ccounts Receivable

$1,912,948.06

Note 4. Inventories

Inventories consisted of the following at June 30, 2003.
June 30, 2003

B o o k s to r e Food S ervices Physical Plant O th e r
T o ta l

$136,120.25
41,458.09 $177,578.34

Note 5. Notes/Loans Receivable
Darton College currently has no loans made through the Federal Perkins Loan Program and therefore, does not provide for an allowance for uncollectible loans.

Annual Financial Report FY 2003 (Version 1.0) 18

Note 6. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2003.

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$989,112.73
989,112.73

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

291,911.66 16,109,652.00
1,557,370.63 2,655,449.97
2,767,115.19
23,381,499.45

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

291,911.66 6,831,814.63
908,051.76 1,855,352.48
2,260,339.00
12,147,469.53

Total Capital Assets, Being Depreciated, Net 11,234,029.92

Capital Assets, net

$12,223,142.65

Additions $0.00 0.00

Reductions $0.00 0.00

Ending Balance 6/30/2003
$989,112.73 0.00
989,112.73

195,213.05 107,720.00 302,933.05

291,911.66
205,522.22 25,149.00
522,582.88

0.00 16,109,652.00
1,557,370.63 2,645,140.80
0.00 2,849,686.19
0.00 23,161,849.62

435,906.80 80,996.49
248,943.14
104,576.00
870,422.43
(567,489.38)
($567,489.38)

291,911.66 726,771.00
98,905.00 395,987.82
25,149.00
1,538,724.48
(1,016,141.60)
($1,016,141.60)

0.00 6,540,950.43
890,143.25 1,708,307.80
0.00 2,339,766.00
0.00 11,479,167.48
11,682,682.14
$12,671,794.87

Annual Financial Report FY 2003 (Version 1.0) 19

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2003.

Prepaid Tuition and Fees Research O the r D eferred Revenue
T o ta ls

June 30, 2003 $18,772.00 286,733.19
$305,505.19

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2003 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2002
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2003

$0.00

$0.00

Current Portion
$0.00

Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total

584,455.27 1,329,444.15 1,327,781.09 584,455.27 1,329,444.15 1,327,781.09

586,118.33 0.00
586,118.33

317,045.63 0.00
317,045.63

Total Long Term Obligations

$584,455.27 $1,329,444.15 $1,327,781.09 $586,118.33

$317,045.63

(a) The beginning balance includes the amount shown as current in FY 2002 and reclassified as long term in FY 2003.

Annual Financial Report FY 2003 (Version 1.0) 20

Note 9. Lease Obligations
Darton College is obligated under various operating leases for the use of equipment.
Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2003, were as follows:

Year Ending June 30:

Year

2004

1

2005

2

2006

3

2007

4

2008

5

2009 through 2011

6-10

2012 through 2018

11-15

2019 through 2023

16-20

2024 through 2028

21-25

2029 through 2033

26-30

2034 through 2038

31-35

2039 through 2043

36-40

Total m inim um lease paym ents

Less: Interest

Less: Executory costs (if paid)

Principal O utstanding

Real Property

C apital Lease s

Operating Leases

$0.00

$78,708.00

$0.00 $0.00

$78,708.00

OPERATING LEASES
Darton's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2004 through 2005. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment.

Annual Financial Report FY 2003 (Version 1.0) 21

Note 10. Retirement Plans

Teachers Retirement System Of Georgia

Plan Description Darton College participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Darton College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Darton College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$657,862.44 $637,593.15 $727,821.19

Regents Retirement Plan
Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.
Funding Policy Darton College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statue and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation. Employees contribute 5% of their earnable
Annual Financial Report FY 2003 (Version 1.0) 22

compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.
Darton College and the covered employees made the required contributions of $223,171.47 (10.02%) and $111,363.74 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description Darton College participates in the Georgia Defined Contribution Plan (GDCP) which is a singleemployer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. The Board of Trustees of the Employees' Retirement System of Georgia administers GDCP.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $88,382.29 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
Darton College is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Darton College and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue
Annual Financial Report FY 2003 (Version 1.0) 23

Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Darton College, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditure, which is disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Darton College expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Darton College (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
Note 13. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University
Annual Financial Report FY 2003 (Version 1.0) 24

System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 71 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, Darton College recognized as incurred $235,938.19 of expenditures, which was net of $77,823.62 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 25

Note 14. Natural Classifications With Functional Classifications The University's operating expenses by functional classification for FY2003 are shown below:

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003
Functional Classification FY2003

Natural Classification

Instruction

Research

Public Service

Academic Support

Faculty Staff B enef it s Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciat io n

$ 5,860,460.52 1,482,967.51 1,598,732.11
42,282.69 (1,724,922.07)
57,361.43 846,004.90
9,041.23

$ 4,875.00 348.14

$ 0.00

3,784.74

$ 3,825.00 1,028,668.66
281,034.73
12,100.74
71,983.64 422,670.11 123,554.40

Total Expenses

$ 8,171,928.32

$ 5,223.14

$ 3,784.74

$ 1,943,837.28

Student Services
$ 2,153.00 1,024,919.86
247,610.95
17,015.47
15,976.82 260,617.30
$ 1,568,293.40

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003

Natural Classification

Institutional Support

Plant Operations & Maintenance

Functional Classification FY2003

Scholarships & Fellowships

Auxiliary Enterprises

Unallocated Expenses

Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation

$0.00 1,174,484.17 667,127.59
1,296.00 19,991.49 1,299.50 14,776.03 800,977.40 (50,111.92)

$0.00 600,631.64 154,729.84
(15,109.18) 14.09
654,908.42 867,472.12
12,713.04

$0.00 4,654,913.20

$2,500.00 216,398.75 50,008.27
15,109.18 53,773.80 123,360.50
2,218.30 1,349,016.59
738.09

$0.00 717,866.99

Total Expenses

$2,629,840.26

$2,275,359.97

$4,654,913.20

$1,813,123.48

$717,866.99

Total Expenses
$5,873,813.52 5,528,070.59 2,999,591.63
1,296.00 145,178.28 3,054,651.13 817,224.64 4,550,543.16 813,801.83
$23,784,170.78

Annual Financial Report FY 2003 (Version 1.0) 26

EAST GEORGIA COLLEGE
Financial Report
For the Year Ended June 30, 2003

J. Foster Watkins
President (Interim)

East Georgia College Swainsboro, Georgia
Adriance M. Galloway
Vice President for Fiscal Affairs

EAST GEORGIA COLLEGE ANNUAL FINANCIAL REPORT
FY 2003
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 8 Statement of Revenues, Expenses and Changes in Net Assets............................................ 9 Statement of Cash Flows ................................................................................................... 10 Note 1 Summary of Significant Accounting Policies ...................................................... 12 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 17 Note 3 Accounts Receivable............................................................................................. 19 Note 4 Inventories............................................................................................................. 20 Note 5 Notes/Loans Receivable........................................................................................ 20 Note 6 Capital Assets........................................................................................................ 21 Note 7 Deferred Revenue.................................................................................................. 22 Note 8 Long-Term Liabilities ........................................................................................... 22 Note 9 Lease Obligations.................................................................................................. 23 Note 10 Retirement Plans ................................................................................................. 24 Note 11 Risk Management................................................................................................ 25 Note 12 Contingencies...................................................................................................... 26 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 26 Note 14 Natural Classifications With Functional Classifications..................................... 28

EAST GEORGIA COLLEGE
Management's Discussion and Analysis

Introduction

East Georgia College is one of the 34 institutions of the University System of Georgia. The College, located in Swainsboro, Georgia, was founded in 1973 and has become known for its state-of-the-art technology, its excellent faculty, and a caring and nurturing environment for its students. The College offers associate degrees in a variety of subjects. This wide range of educational opportunities attracts a highly qualified faculty and a student body that now exceeds 1,400 students. The institution continues to grow as shown by the comparison numbers that follow.

Faculty

Students

FY2003 FY2002 FY2001

38

1,499

35

1,393

27

1,313

Overview of the Financial Statements and Financial Analysis

East Georgia College is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2002 and FY 2003.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of East Georgia College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements.

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

Annual Financial Report FY 2003 (Version 1.0) 1

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

Assets: C urrent Assets C apital Assets, net Other Assets Total Assets

June 30, 2003
$1,533,544.78 11,757,779.04
281,271.99 13,572,595.81

June 30, 2002
$2,128,543.16 7,080,560.11 4,949.50 9,214,052.77

Liabilities: C urrent Liabilities Noncurrent Liabilities Total Liabilities

917,375.48 92,150.77
1,009,526.25

1,262,655.58 1,262,655.58

Net Assets: Invested in C apital Assets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects Unrestricted Total Net Assets

10,833,962.34 37,100.00 557.14
1,691,450.08 $12,563,069.56

7,080,560.11 37,100.00 8,608.00
825,129.08 $7,951,397.19

The total assets of the institution increased by $4,358,543.04. This increase was due to an increase in capital assets and other non-current assets, offset by a reduction of cash and shortterm investments. See Note 1 in the notes to the financial statements for additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution.
The total liabilities for the year decreased by ($253,129.33). The primary cause for the decrease was due to a reduction in accounts payable and accrued liabilities as well as a decrease in deferred revenue. The combination of the increase in total assets of $4,358,543.04 and the decrease in total liabilities of ($253,129.33) yields an increase in total net assets of
Annual Financial Report FY 2003 (Version 1.0) 2

$4,611,672.37. The increase in total net assets is primarily in the category of Unrestricted Net Assets.

Statement of Revenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30, 2003

Operating Revenues Operating Expenses Operating Loss

$3,237,874.06 8,649,996.05 (5,412,121.99)

Nonoperating Revenues and Expenses

5,593,403.76

Income (Loss) Before other revenues, expenses, gains or losses

181,281.77

Other revenues, expenses, gains or losses

4,298,373.90

Increase in Net Assets

4,479,655.67

Net Assets at beginning of year, as originally reported C umulative effect of changes in accounting principle Prior Year Adjustments Net Assets at beginning of year, restated

7,951,397.19
132,016.70 8,083,413.89

Net Assets at End of Year

$12,563,069.56

June 30, 2002 $2,703,700.36
7,762,290.12 (5,058,589.76) 5,357,606.48
299,016.72 27,483.00
326,499.72 14,471,947.76
6,847,050.29 7,624,897.47 $7,951,397.19

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:
Annual Financial Report FY 2003 (Version 1.0) 3

Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

Operating Revenue Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Auxiliary Other
Total Operating Revenue
Nonoperating Revenue State Appropriations Gifts Investment Income Grants and Contracts Other
Total Nonoperating Revenue
Capital Gifts and Grants State Capital Appropriations Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

June 30, 2003
$1,062,966.18 2,035,684.71 43,100.20 32,003.94 64,119.03 3,237,874.06
5,052,024.00 7,569.85
533,809.91 5,593,403.76
4,298,373.90
4,298,373.90 $13,129,651.72

June 30, 2002
$1,069,157.05 1,567,494.98 22,029.60 24,868.72 20,150.01 2,703,700.36
5,310,447.00 58,582.48 (11,423.00)
5,357,606.48
27,483.00 27,483.00 $8,088,789.84

Annual Financial Report FY 2003 (Version 1.0) 4

Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003 $2,933,653.79
847,643.96 1,018,922.86
553,504.92 1,270,679.34
990,970.15 1,037,452.43
(2,831.40)
8,649,996.05
$8,649,996.05

June 30, 2002 $3,013,559.70
930,491.12 529,092.38 1,120,913.77 1,320,628.38 837,391.71
10,213.06
7,762,290.12
$7,762,290.12

Federal Grants and Contracts increased by $444,625.32 due to an increase in the number of students participating in the Pell Grants program. State Grants and Contracts increased $10,365.83 to reflect an increase for funding of the Magnolia-Midlands Georgia Youth Science and Technology Center. Nongovernmental Grants and Contracts increased by $13,198.58 due to an increase in private scholarships, and Sales and Services of Educational Departments increased by $21,070.60 due to increased revenue from Lifelong Education (LEADS) programs.
The compensation and employee benefits category increased by approximately $381,426.53. The increase reflects the annualization of employee salaries from FY2003, the increases in health and life insurance premiums, and also reflects an increase in salaries for faculty along with a decrease in salaries for staff personnel.
Utilities increased by approximately $26,989.75 during the past year. The increase was primarily associated with the construction completion and opening of the new Classroom Addition/Activity Center facility in the winter of fiscal year 2003.
Under non-operating revenues (expenses) state appropriations decreased by approximately ($258,423.00). This reduction is reflective of budget reductions mandated by the Governor and the state legislature due to a shortfall in state revenues.

Statement of Cash Flows

Annual Financial Report FY 2003 (Version 1.0) 5

The final statement presented by the East Georgia College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Year Ended June 30, 2003, Condensed

Cash Provided (used) By: Operating Activities Non-capital Financing Activities Investing Activities Capital and Related Financing Activities
Net Change in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2003
($5,421,586.56) 5,096,923.60 638,125.56 (232,958.74)
80,503.86 557,517.97
$638,021.83

Capital Assets
The College had one significant capital asset addition for facilities in fiscal year 2003. The Classroom Addition/Activity Center construction was completed and placed in service mid-year in fiscal year 2003.
East Georgia College had one primary MRR (Major Repair and Renovation) project in fiscal year 2003 which was not completed before the end of the fiscal year. Construction work in progress reflects the portion of work completed by year end (approximately 70%). This building improvement project is expected to be completed by the fall semester mid-term. MRR funding was provided by the Georgia State Finance and Investment Commission (GSFIC). Projected MRR funding by GSFIC for FY2004 will be approximately the same.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Economic Outlook
Annual Financial Report FY 2003 (Version 1.0) 6

The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is strong. Even with the budget reductions mandated by the Governor, the College was able to generate a modest increase in Net Assets. The College anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues. _____________________________ J. Foster Watkins, Interim President East Georgia College
Annual Financial Report FY 2003 (Version 1.0) 7

Statement of Net Assets
EAST GEORGIA C OLLEGE STATEMENT OF NET ASSETS
June 30, 2003
ASSETS Current Assets C ash and C ash Equivalents S hort-term Investm ents A ccounts Receivable, net I n v e n to r ie s Othe r A ssets Total C urrent A ssets
Noncurrent Assets Noncurrent C ash Investm ents Notes Receivable, net C apital A ssets, net Total Noncurrent A ssets TOTAL ASSETS
LIA BILIT IE S Current Liabilities A ccounts Payable and A ccrued Liabilities D eposits Deferred Revenue Othe r Liabilities D eposits Held for Othe r Organizations C om pensated A bsences (current portion) Total C urrent Liabilities Noncurrent Liabilities C om pensated A bsences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES

June 30, 2003
$638,021.83
712,774.62 4,156.60
178,591.73 1,533,544.78
276,735.49 4,536.50
11,757,779.04 12,039,051.03 13,572,595.81
139,840.34 (695.00)
522,022.63 60,103.57 78,525.54
117,578.40 917,375.48
92,150.77
92,150.77 1,009,526.25

NET ASSETS Invested in C apital A ssets, net of related debt Restricted for No ne x p e nd a b le Ex p e nd a b le C apital Projects U n r e s tr ic te d TOTAL NET ASSETS

10,833,962.34
37,100.00 557.14
1,691,450.08 $12,563,069.56

Annual Financial Report FY 2003 (Version 1.0) 8

Statement of Revenues, Expenses and Changes in Net Assets

EAST GEORGIA COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2003

June 30, 2003

REVENUES

Operating Revenues

Student Tuition and Fees

$1,883,901.42

Less: Sponsored and Unsponsored Scholarships

(820,935.24)

Federal Appropriations

Federal Grants and C ontracts

1,899,261.12

State and Local Grants and C ontracts

88,024.07

Nongovernmental Grants and C ontracts

48,399.52

Sales and Services of Educational Departments

43,100.20

Auxiliary Enterprises

32,003.94

Other Operating Revenues

64,119.03

Total Operating Revenues

3,237,874.06

EXPENSES

Operating Expenses

Salaries:

Faculty

1,886,171.85

Staff

2,032,016.11

Benefits Other Personal Services

1,122,731.28

Travel

42,493.13

Scholarships and Fellowships

1,045,481.01

Utilities

369,634.36

Supplies and Other Services Depreciation

1,642,093.65 509,374.66

Total Operating Expenses

8,649,996.05

Operating Income (loss) NONOPERATING REVENUES (EXPENSES)

(5,412,121.99)

State Appropriations

5,052,024.00

Gifts

Investment Income (endowments, auxiliary and other) Interest Expense (capital assets)

7,569.85

Other Nonoperating Revenues

533,809.91

Net Nonoperating Revenues

5,593,403.76

Income before other revenues, expenses, gains, or loss

181,281.77

State C apital Appropriations

4,298,373.90

C apital Grants and Gifts

Federal Grants & C ontracts

State Grants & C ontracts

Other Grants and C ontracts

Total Other Revenues

4,298,373.90

Increase in Net Assets NET ASSETS

4,479,655.67

Net Assets-beginning of year, as originally reported

7,951,397.19

C umulative effect of changes in accounting principle

Prior Year Adjustments

132,016.70

Net Assets-beginning of year, restated

8,083,413.89

Net Assets-End of Year

$12,563,069.56

Annual Financial Report FY 2003 (Version 1.0) 9

Statement of Cash Flows
EAST GEORGIA COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2003
CASH F LOWS F ROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities
CASH F LOWS F ROM NON-CAPITAL F INANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities
CASH F LOWS F ROM CAPITAL AND RELATED F INANCING ACTIVITIES C apital Grants and Gifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital Debt and Leases Interest Paid on C apital Debt and Leases Net C ash used by C apital and Related Financing Activities
CASH F LOWS F ROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003
$1,823,656.87
1,835,428.61 51,216.25
(3,475,169.61) (3,915,282.15) (1,866,416.25)
32,214.61 1,055.48
14,877.20
1,659.44 75,172.99 (5,421,586.56)
4,962,557.98 (62,020.14) 196,385.76
5,096,923.60
(232,958.74)
(232,958.74)
27,679.04 610,446.52 638,125.56
80,503.86 557,517.97 $638,021.83

Annual Financial Report FY 2003 (Version 1.0) 10

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating Activities
D e pr e c ia tio n C hange in Assets and Liabilities:
Receivables, net I nv e nto r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($5,412,121.99)
509,374.66
(225,644.34) 4,520.00
22,096.23 (370,064.01)
(64,562.52) 81,645.95 33,169.46
($5,421,586.56)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current Assets

$638,021.83 $638,021.83

East Georgia College had no transactions to report as "Non-Cash Investing, Non-Capital Financing, and Capital and Related Financing Transactions".

Annual Financial Report FY 2003 (Version 1.0) 11

East Georgia College NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations East Georgia College serves the state and regional communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity East Georgia College is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of East Georgia College as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. East Georgia College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, East Georgia College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the College is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of
Annual Financial Report FY 2003 (Version 1.0) 12

materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
Basis of Accounting For financial reporting purposes, the College is considered a special-purpose government engaged only in business-type activities. Accordingly, the College's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-college transactions have been eliminated.
The college has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The college has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The College accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Consumable supplies are carried at the lower of cost or market on either the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis.
Annual Financial Report FY 2003 (Version 1.0) 13

Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the College's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to East Georgia College when complete. For the year ended June 30, 2003, GSFIC transferred capital additions valued at $4,298,373.90 to East Georgia College.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. East Georgia College had accrued liability for compensated absences in the amount of $176,559.71 as of 7-1-2002. For FY2003, $163,791.16 was earned in compensated absences and employees were paid $130,621.70, for a net increase
Annual Financial Report FY 2003 (Version 1.0) 14

of $33,169.46. The ending balance as of 6-30-2003 in accrued liability for compensated absences is $209,729.17.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The College's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.
Annual Financial Report FY 2003 (Version 1.0) 15

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted Total Unrestricted Net Assets

June 30, 2003
$58,815.10 692,404.36
4,000.00 936,230.62 $1,691,450.08

When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes East Georgia College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the College, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for sponsored and unsponsored scholarships.
Annual Financial Report FY 2003 (Version 1.0) 16

Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus East Georgia College) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus East Georgia College), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Annual Financial Report FY 2003 (Version 1.0) 17

Categorization of Deposits
The College's cash deposits are categorized by risk as follows:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the College or by its agent in the College's name.
Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the College's name.
Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the College's name, and amounts uncollateralized.
Cash Deposits as of June 30, 2003

C ash Deposits Investment Portfolio Accounts
Total C ash Deposits

C arrying Amount
$27,575.31

Bank Balances
$425,758.59

Risk C ategories

1

2

3

$100,000.00

$0.00 $325,758.59

$27,575.31

$425,758.59 $100,000.00

$0.00 $325,758.59

Categorization of Investments
The College's investments are categorized as to credit risk within the three categories described below:
Category 1 - Insured or registered, or securities held by the College or its agent in the College's name
Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the College's name.
Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the College's name.

Annual Financial Report FY 2003 (Version 1.0) 18

At June 30, 2003, the College's investments consisted of the following:

Ty pe of Inv estm ents
C om m on S tock C orporate B onds S e curitie s a nd C orpora te O bliga tions

R isk C ategorie s

1

2

$0.00

$0.00

3 $0.00

To ta ls

$0.00

$0.00

$0.00

C arrying Amount
$0.00 0.00 0.00
$0.00

Inv e stm e nts Not S ubje ct to C a te goriza tions: B oa rd of R e ge nts
S hort-Te rm Fund Balanced Incom e Fund Tota l R e turn Fund Inv e stm e nt P ortfolio A ccounts Mutual Funds R e a l Esta te S ta te Inv e stm e nt Pool S hort-Te rm Inv e stm e nts
Tota l Inv e stm e nts

610,446.52 261,251.03
15,484.46
$887,182.01

Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the College did not own any specific, identifiable investment securities of the pool.

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2003.

June 30, 2003

S tudent Tuition and Fees A uxiliary Enterprises and Other Operating A ctivities Fede ral, S tate , and Private Funds O the r
Less A llowance for D oubtful A ccounts

$376,880.19 3,915.26
325,845.75 17,524.29
724,165.49 11,390.87

Net A ccounts Receivable

$712,774.62

Annual Financial Report FY 2003 (Version 1.0) 19

Note 4. Inventories

Inventories consisted of the following at June 30, 2003.

June 30 , 2 00 3

Bookst ore Fo o d Serv ices P hysical P lant Other
T otal

$2,088.72
2,067.88 $4,156.60

Note 5. Notes/Loans Receivable
Notes/Loans receivable consists of student loans made through the Student Government Association Loan Fund. This loan program comprises all of the loans receivable at June 30, 2003. The use of this small loan fund has decreased as students have increased their use of federal and state loan programs such as subsidized and unsubsidized Stafford Loans and Plus Loans to finance their educations.

Annual Financial Report FY 2003 (Version 1.0) 20

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2003.

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$221,959.45
221,959.45

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

1,444,596.00 7,600,717.00
468,029.00 1,633,838.77
1,047,475.31
12,194,656.08

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

1,100,000.59 2,063,742.63
415,355.02 922,167.18
834,790.00
5,336,055.42

Total Capital Assets, Being Depreciated, Net 6,858,600.66

Capital Assets, net

$7,080,560.11

Additions
$0.00 133,632.00 133,632.00

Reductions $0.00 0.00

Ending Balance 6/30/2003
$221,959.45 133,632.00 355,591.45

4,932,134.36 74,100.45
266,258.60
20,392.85
5,292,886.26

69,953.00 47,012.00 568,894.95
24,416.07
710,276.02

1,444,596.00 12,462,898.36
495,117.45 1,331,202.42
0.00 1,043,452.09
0.00 16,777,266.32

63,228.22 402,175.21
23,630.98 273,029.51
35,724.67
797,788.59
4,495,097.67
$4,628,729.67

110,000.06 283,123.87
83,729.42 281,072.88
839.05
758,765.28

1,053,228.75 2,182,793.97
355,256.58 914,123.81
0.00 869,675.62
0.00 5,375,078.73

(48,489.26) 11,402,187.59

($48,489.26) $11,757,779.04

Annual Financial Report FY 2003 (Version 1.0) 21

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2003.

P re p a id T uitio n a nd Fe e s Research O the r D e fe rre d R e v e nue
T o ta ls

June 30, 2003 $508,214.63 13,808.00 $522,022.63

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2003 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2002
$0.00

Additions $3.90

Reductions

Ending Balance June 30, 2003

$3.90

$0.00

Current Portion
$0.00

Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total

176,559.71 176,559.71

163,791.16 163,791.16

130,621.70 130,621.70

209,729.17 0.00
209,729.17

117,578.40 117,578.40

Total Long Term Obligations

$176,559.71 $163,795.06

$130,625.60 $209,729.17

$117,578.40

(a) The beginning balance includes the amount shown as current in FY2002 and reclassified as long-term in FY2003.

Annual Financial Report FY 2003 (Version 1.0) 22

Note 9. Lease Obligations
East Georgia College is obligated under one operating lease for the use of equipment.
Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2003, were as follows:

Year Ending June 30:

Year

2004

1

2005

2

2006

3

2007

4

2008

5

2009 through 2011

6-10

2012 through 2018

11-15

2019 through 2023

16-20

2024 through 2028

21-25

2029 through 2033

26-30

2034 through 2038

31-35

2039 through 2043

36-40

Total m inim um lease paym ents

Less: Interest

Less: Executory costs (if paid)

Principal O utstanding

Real Property

C apital Lease s

Operating Leases

$960.00

0.00 $0.00

$960.00

CAPITAL LEASES
East Georgia College is not obligated under any capital leases.
OPERATING LEASES
East Georgia College is obligated under one operating lease for equipment that is payable on a monthly basis. We do expect to continue our present lease arrangement through fiscal year 2004. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. Before the end of fiscal year 2004, a decision will be made to renew the lease for the existing equipment or acquire new equipment under new lease terms

Annual Financial Report FY 2003 (Version 1.0) 23

Note 10. Retirement Plans

Teachers Retirement System Of Georgia

Plan Description East Georgia College participates in the Teachers Retirement System of Georgia (TRS), a costsharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of East Georgia College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. East Georgia College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$239,158.11 $224,620.08 $271,426.37

Regents Retirement Plan

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.

Funding Policy East Georgia College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statue and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation. Employees contribute 5% of their

Annual Financial Report FY 2003 (Version 1.0) 24

earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times.
East Georgia College and the covered employees made the required contributions of $102,998.36 (10.02%) and $51,380.05 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description East Georgia College participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $6,131.20 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
East Georgia College is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. East Georgia College and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue
Annual Financial Report FY 2003 (Version 1.0) 25

Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. East Georgia College, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although East Georgia College expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against East Georgia College (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
Note 13. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University
Annual Financial Report FY 2003 (Version 1.0) 26

System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 24 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, East Georgia College recognized as incurred $89,186.44 of expenditures, which was net of $36,973.44 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 27

Note 14. Natural Classifications With Functional Classifications The College's operating expenses by functional classification for FY2003 are shown below:

St at ement of Operat ing Expenses - Nat ural vs Func t ional Classific at ions For t he Fisc al Y ear Ended June 30, 2003
Func t ional Classific at ion FY 2003

Natural C lassification

I n s tr u c tio n

Research

Public S e rv ic e

A c a d e m ic Support

F ac ult y Staff B enefits P erso nal Services T rav el Sc ho lars hips and F ello ws hips Ut ilit ie s Supplies and Others Services D epreciatio n

$ 1,882,291.85 155,861.94 487,740.95
6,926.53 2,700.00 30,609.13 348,094.78 19,428.61

$ 0.00

$ 0.00 158,795.49
35,662.10
1,558.67
3,162.43 644,320.87
4,144.40

$ 3,880.00 499,207.90 113,752.97
13,673.10 5,328.58 24,571.59 273,933.66 84,575.06

T o tal Expenses

$ 2,933,653.79

$ 0.00

$ 847,643.96

$ 1,018,922.86

S tudent S e r v ic e s
$ 0.00 314,396.13 82,060.96
7,776.81
10,158.39 136,782.63
2,330.00
$ 553,504.92

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003

Natural Classification

Inst it utio nal Suppo rt

P lant Operatio ns & M aintenance

Functional Classification FY2003

Scho larships & Fellowships

A uxiliary Enterprises

Unallo cated Expenses

Faculty Staff B enef its Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciatio n

$ 0.00 643,498.04 318,624.37
12,558.02
25,466.64 222,803.52
47,728.75

$ 0.00 259,542.01 84,889.93

$ 0.00

$ 0.00 714.60

$ 0.00

274,454.28 132,902.09 239,181.84

1,037,452.43

1,211.90 (116,743.90)
111,986.00

Total Expenses

$ 1,270,679.34

$ 990,970.15

$ 1,037,452.43

($ 2,831.40)

$ 0.00

To tal Expenses
$ 1,886,171.85 2,032,016.11 1,122,731.28 0.00 42,493.13 1,045,481.01 369,634.36 1,642,093.65 509,374.66
$ 8,649,996.05

Annual Financial Report FY 2003 (Version 1.0) 28

FLOYD COLLEGE
Financial Report
For the Year Ended June 30, 2003

Floyd College Atlanta, Georgia

Dr. John Randolph Pierce
President

Karen Porter
Vice President for Finance & Business

FLOYD COLLEGE ANNUAL FINANCIAL REPORT
FY 2003
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 7 Statement of Revenues, Expenses and Changes in Net Assets............................................ 8 Statement of Cash Flows ..................................................................................................... 9 Note 1 Summary of Significant Accounting Policies ...................................................... 11 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 16 Note 3 Accounts Receivable............................................................................................. 18 Note 4 Inventories............................................................................................................. 18 Note 5 Notes/Loans Receivable........................................................................................ 18 Note 6 Capital Assets........................................................................................................ 19 Note 7 Deferred Revenue.................................................................................................. 20 Note 8 Long-Term Liabilities ........................................................................................... 20 Note 9 Lease Obligations.................................................................................................. 21 Note 10 Retirement Plans ................................................................................................. 23 Note 11 Risk Management................................................................................................ 24 Note 12 Contingencies...................................................................................................... 25 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 25 Note 14 Natural Classifications With Functional Classifications..................................... 27

FLOYD COLLEGE
Management's Discussion and Analysis

Introduction

Floyd College is one of the 34 institutions of the University System of Georgia. The College, located in Rome, Georgia, was founded in 1970 and has become known for its state-of-the-art technology and allied health programs. The College offers associate of science and associate of art degrees in a wide variety of subjects. This wide range of educational opportunities attracts a highly qualified faculty and a student body of more than 3,800 students each year. The institution continues to grow as shown by the comparison numbers that follow.

Faculty

Students

FY2003 FY2002 FY2001

79

3,984

69

3,679

65

3,217

Overview of the Financial Statements and Financial Analysis

Floyd College is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2002 and FY 2003.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Floyd College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements.

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is
Annual Financial Report FY 2003 (Version 1.0) 1

restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

Assets: C urrent Assets C apital Assets, net Other Assets Total Assets

June 30, 2003
$2,452,663.48 11,844,550.21
14,297,213.69

June 30, 2002
$2,255,502.40 11,727,064.94
(1,164.27) 13,981,403.07

Liabilities: C urrent Liabilities Noncurrent Liabilities Total Liabilities

1,616,661.12 238,096.76
1,854,757.88

2,106,223.87 2,106,223.87

Net Assets: Invested in C apital Assets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects Unrestricted Total Net Assets

11,046,449.86 27,969.20
445,545.83
922,490.92 $12,442,455.81

11,727,064.94 27,209.37 654.19
120,250.70 $11,875,179.20

The total net assets of the institution increased $567,276.61. A review of the Statement of Net Assets revealed a decrease of ($680,615.08) in investment in plant, net of accumulated depreciation. See Note 1 in the notes to the financial statements for additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets. Additionally, there was an increase of $802,240.22 in unrestricted assets.
The total liabilities for the year decreased ($251,465.99). The primary cause for the decrease was in current liabilities, primarily ($587,944.33) in deposits held for others and (224,166.83) in compensated absences. The combination of the increase in total assets of $315,810.62 and the decrease in total liabilities of ($251,465.99) yields an increase in total net assets of $567,276.61
Statement of Revenues, Expenses and Changes in Net Assets
Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking
Annual Financial Report FY 2003 (Version 1.0) 2

operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

Operating Revenues Operating Expenses Operating Loss

June 30, 2003
$8,422,774.79 18,859,877.60 (10,437,102.81)

June 30, 2002
$6,804,265.36 16,769,695.79 (9,965,430.43)

Nonoperating Revenues and Expenses

9,931,719.33

10,798,668.00

Income (Loss) Before other revenues, expenses, gains or losses

(505,383.48)

833,237.57

Other revenues, expenses, gains or losses

6,266.00

Increase in Net Assets
Net Assets at beginning of year, as originally reported C umulative effect of changes in accounting principle Prior Year Adjustments Net Assets at beginning of year, restated

(499,117.48)
11,875,179.20
1,066,394.09 12,941,573.29

833,237.57
33,982,652.55 22,940,710.92
11,041,941.63

Net Assets at End of Year

$12,442,455.81

$11,875,179.20

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:

Annual Financial Report FY 2003 (Version 1.0) 3

Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

Operating Revenue Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Auxiliary Other
Total Operating Revenue
Nonoperating Revenue State Appropriations Gifts Investment Income Grants and Contracts Other
Total Nonoperating Revenue
Capital Gifts and Grants State Capital Appropriations Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

June 30, 2003

June 30, 2002

$2,756,925.74 3,679,981.56 243,110.75 1,458,111.05 284,645.69
8,422,774.79

$2,434,160.82 2,396,567.59 243,891.00 1,366,762.15 362,883.80
6,804,265.36

9,928,390.38 5,240.17 (1,911.22)
9,931,719.33

10,802,750.00 1,818.70 (5,900.70)
10,798,668.00

6,266.00 6,266.00 $18,360,760.12

0.00 $17,602,933.36

Annual Financial Report FY 2003 (Version 1.0) 4

Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003 $7,789,974.68
1,499,094.60 1,273,047.31 3,287,465.82
779,766.75 1,079,085.52 1,289,437.32 1,862,005.60 18,859,877.60
$18,859,877.60

June 30, 2002 $5,968,361.76
1,908,132.36 1,122,776.97 3,304,662.24 1,961,230.98 1,808,442.25 1,388,383.16
(692,293.93) 16,769,695.79
$16,769,695.79

Nongovernmental grants and contracts increased in the amount of $179,393.68. This is primarily a result of collaborative programs with sister institutions, the Nursing ICAPP initiative and the NW Georgia Cancer Coalition.
The compensation and employee benefits category increased by approximately $577,405.45. The increase reflects an increased cost of health insurance for the employees of the institution.
Utilities increased by approximately $50,590.44 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2003.
Under non-operating revenues (expenses) state appropriations decreased by approximately ($874,359.62). The decrease was a result of statewide budget reductions due to a poor economy.

Statement of Cash Flows
The final statement presented by the Floyd College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash
Annual Financial Report FY 2003 (Version 1.0) 5

used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Year Ended June 30, 2003, Condensed

Cash Provided (used) By: Operating Activities Non-capital Financing Activities Investing Activities Capital and Related Financing Activities
Net Change in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2003
($9,157,738.80) 9,181,337.62 7,164.27 (101,920.42)
(71,157.33) 957,159.75
$886,002.42

Capital Assets
Floyd College completed several small renovations FY2003. The $138,628.00 for the projects was funded by the Georgia State Finance and Investment Commission (GSFIC). Additionally, the college received a one time legislative adjustment of $100,000.00 to be used by facilities. Projected funding by GSFIC for FY2003 will be approximately the same.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Economic Outlook
The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is strong. Even with a relatively flat funded year, the College was able to generate a modest increase in Net Assets. The College anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues.
_______________________ Dr. John Randolph Pierce, President Floyd College

Annual Financial Report FY 2003 (Version 1.0) 6

Statement of Net Assets
FLOYD COLLEGE STATEMENT OF NET ASSETS
June 30, 2003
ASSETS Current Assets C ash and C ash Equivalents Short-term Investments Accounts Receivable, net I nv e n to r ie s Other Assets Total C urrent Assets
Noncurrent Assets Noncurrent C ash I nv e s tm e nts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS
LIA BILIT IE S Current Liabilities Accounts Payable and Accrued Liabilities D e p o s its Deferred Revenue Other Liabilities Deposits Held for Other Organizations C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES

June 30, 2003
$886,002.42 1,334,516.98
242,871.67 (10,727.59) 2,452,663.48
11,844,550.21 11,844,550.21 14,297,213.69
81,650.92 710,311.28 291,546.23 177,521.80 355,630.89 1,616,661.12 238,096.76 238,096.76 1,854,757.88

NET ASSETS Invested in C apital Assets, net of related debt Restricted for Nonexpendable Expendable C apital Projects Un r e s tr ic te d TOTAL NET ASSETS

11,046,449.86
27,969.20 445,545.83
922,490.92 $12,442,455.81

Annual Financial Report FY 2003 (Version 1.0) 7

Statement of Revenues, Expenses and Changes in Net Assets

FLOYD COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2003
June 30, 2003

REVENUES

Operating Revenues

Student Tuition and Fees

$4,225,506.54

Less: Sponsored and Unsponsored Scholarships

(1,468,580.80)

Federal Appropriations

Federal Grants and Contracts

2,963,125.06

State and Local Grants and Contracts

429,705.65

Nongovernmental Grants and Contracts

287,150.85

Sales and Services of Educational Departments

243,110.75

Auxiliary Enterprises

1,458,111.05

Other Operating Revenues

284,645.69

Total Operating Revenues

8,422,774.79

EXPENSES

Operating Expenses

Salaries:

Faculty Staff

4,503,953.26 5,312,705.44

Benefits Other Personal Services

2,602,039.72 1,278.00

Travel

167,245.74

Scholarships and Fellowships

1,101,460.12

Utilities

804,515.13

Supplies and Other Services Depreciation

3,387,870.51 978,809.68

Total Operating Expenses

18,859,877.60

Operating Income (loss) NONOPERATING REVENUES (EXPENSES)

(10,437,102.81)

State Appropriations

9,928,390.38

Gifts

Investment Income (endowments, auxiliary and other) Interest Expense (capital assets)

5,240.17

Other Nonoperating Revenues

(1,911.22)

Net Nonoperating Revenues

9,931,719.33

Income before other revenues, expenses, gains, or loss

(505,383.48)

State Capital Appropriations

Capital Grants and Gifts

6,266.00

Federal Grants & Contracts

State Grants & Contracts

Other Grants and Contracts

Total Other Revenues

6,266.00

Increase in Net Assets NET ASSETS

(499,117.48)

Net Assets-beginning of year, as originally reported

11,875,179.20

Cumulative effect of changes in accounting principle

Prior Year Adjustments

1,066,394.09

Net Assets-beginning of year, restated

12,941,573.29

Net Assets-End of Year

$12,442,455.81

Annual Financial Report FY 2003 (Version 1.0) 8

Statement of Cash Flows
FLOYD COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2003
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales & Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships & Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities
CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES C apital Grants and Gifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital Debt and Leases Interest Paid on C apital Debt and Leases Net C ash used by C apital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003 $4,254,658.55
3,838,370.91 292,884.49
(6,803,137.34) (9,860,940.50) (2,570,040.92)
1,252,888.86 57,753.60
146,904.91 232,918.64 (9,157,738.80) 10,056,194.00 (874,856.38) 9,181,337.62
(101,920.42)
(101,920.42) 1,164.27 6,000.00 7,164.27
(71,157.33) 957,159.75 $886,002.42

Annual Financial Report FY 2003 (Version 1.0) 9

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating Activities
Depreciation C hange in Assets and Liabilities:
Receivables, net Inventories Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($10,437,102.81)
978,809.68
49,906.99 (7,450.80) 12,159.13 59,231.34 9,511.67 163,266.07 13,929.93
($9,157,738.80)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current Assets

$886,002.42 $886,002.42

Floyd College had no transactions to report under Non-Cash Investing, Non-Capital Financing, and Capital and Related-Financing Transactions.

Annual Financial Report FY 2003 (Version 1.0) 10

FLOYD COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations Floyd College serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity Floyd College is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Floyd College as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Floyd College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Floyd College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the College is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of
Annual Financial Report FY 2003 (Version 1.0) 11

materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
Basis of Accounting For financial reporting purposes, the College is considered a special-purpose government engaged only in business-type activities. Accordingly, the College's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-college transactions have been eliminated.
The College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The College accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Consumable supplies are carried at the lower of cost or market on either the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis.
Annual Financial Report FY 2003 (Version 1.0) 12

Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the College's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a College residence hall.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Floyd College had accrued liability for compensated absences in the amount of $579,797.72 as of 7-1-2002. For FY2003, $412,061.20 was earned in compensated absences and employees were paid $377,157.03, for a net increase of $34,904.17. The report used in the FY2002 calculation did not cap at 360 hours of annual leave and was not
Annual Financial Report FY 2003 (Version 1.0) 13

adjusted for FICA. Adjustments of <$20,974.24> were made to the beginning balance for these reasons. The ending balance as of 6-30-2003 in accrued liability for compensated absences is $593,727.65.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The College's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.
Annual Financial Report FY 2003 (Version 1.0) 14

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted Total Unrestricted Net Assets

June 30, 2003
$180,349.08 163,349.44 249,856.22 328,936.18
$922,490.92

When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes Floyd College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the College, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for sponsored and unsponsored scholarships.
Annual Financial Report FY 2003 (Version 1.0) 15

Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus Floyd College) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus Floyd College), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Categorization of Deposits
The College's cash deposits are categorized by risk as follows:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the College or by its agent in the College's name.
Annual Financial Report FY 2003 (Version 1.0) 16

Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the College's name.
Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the College's name, and amounts uncollateralized.
Cash Deposits as of June 30, 2003

C ash Deposits Investment Portfolio Accounts
Total C ash Deposits

C arrying Amount
$886,002.42 26,804.93
$912,807.35

Bank Balances
$1,035,271.87 0.00
$1,035,271.87

Risk C ategories

1

2

3

$200,000.00

$0.00 $835,271.87

$200,000.00

$0.00 $835,271.87

Categorization of Investments
The College's investments are categorized as to credit risk within the three categories described below:
Category 1 - Insured or registered, or securities held by the College or its agent in the College's name
Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the College's name.
Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the College's name.
Floyd College had no investments as of June 30, 2003.

Annual Financial Report FY 2003 (Version 1.0) 17

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2003.

June 30, 2003

S tudent Tuition and Fees A uxiliary Enterprises and Other Operating A ctivities Fede ral, S tate , and Private Funds O the r
Less A llowance for D oubtful A ccounts

$598,287.64 79,249.83
653,735.33 21,770.33
1,353,043.13 18,526.15

Net A ccounts Receivable

$1,334,516.98

Note 4. Inventories

Inventories consisted of the following at June 30, 2003.
June 30, 2003

B o o k store Food S ervices Phy sical Plant O the r
To ta l

$231,859.06 3,159.18
7,853.43 $242,871.67

Note 5. Notes/Loans Receivable
Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2003 and 2002. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the College for amounts cancelled under these provisions. As the College determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The College has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2003 Floyd College had no allowance for uncollectible loans.

Annual Financial Report FY 2003 (Version 1.0) 18

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2003.

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$569,000.00
569,000.00

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

1,559,436.00 18,057,284.00
1,146,957.00 2,268,284.13
2,007,561.10
25,039,522.23

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

1,122,120.47 8,537,157.94
883,263.88 1,768,218.52
1,570,696.48
13,881,457.29

Total Capital Assets, Being Depreciated, Net 11,158,064.94

Capital Assets, net

$11,727,064.94

Additions $490.00 490.00

Reductions $0.00 0.00

Ending Balance 6/30/2003
$569,490.00 0.00
569,490.00

406,102.00 203,051.00 266,039.24 181,020.74 1,056,212.98

609,153.00
214,431.28 217,469.36 1,041,053.64

1,356,385.00 18,057,284.00
1,350,008.00 2,319,892.09
0.00 1,971,112.48
0.00 25,054,681.57

131,070.14 810,812.98 293,597.49 402,636.16
453,048.80
2,091,165.57

339,907.26 1,141,853.68
154,069.77 272,306.64
284,864.15
2,193,001.50

913,283.35 8,206,117.24 1,022,791.60 1,898,548.04
0.00 1,738,881.13
0.00 13,779,621.36

(1,034,952.59) (1,151,947.86) 11,275,060.21

($1,034,462.59) ($1,151,947.86) $11,844,550.21

Annual Financial Report FY 2003 (Version 1.0) 19

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2003.
June 30, 2003

P re p a id T uitio n a nd Fe e s Research O the r D e fe rre d R e v e nue

$710,311.28

T o ta ls

$710,311.28

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2003 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total
Total Long Term Obligations

Beginning Balance July 1, 2002
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2003

$0.00

$0.00

579,797.72

412,061.20

579,797.72

412,061.20

$579,797.72 $412,061.20

398,131.27 398,131.27

593,727.65 0.00
593,727.65

$398,131.27 $593,727.65

Current Portion
$0.00
355,630.89 355,630.89 $355,630.89

(a) The beginning balace includes the amount shown as current in FY02 and classified as long-term in FY03

Annual Financial Report FY 2003 (Version 1.0) 20

Note 9. Lease Obligations
Floyd College is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property.
Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2003, were as follows:

Year Ending June 30:

Year

2004

1

2005

2

2006

3

2007

4

2008

5

2009 through 2011

6-10

2012 through 2018

11-15

2019 through 2023

16-20

2024 through 2028

21-25

2029 through 2033

26-30

2034 through 2038

31-35

2039 through 2043

36-40

Total m inim um lease paym ents

Less: Interest

Less: Executory costs (if paid)

Principal O utstanding

Real Property

C apital Lease s

Operating Leases

$97,183.30 60,500.00 31,000.00 6,000.00 6,000.00

0.00
0.00 $0.00

$200,683.30

CAPITAL LEASES
Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2007 and 2011. Floyd College currently has no capital leases.
OPERATING LEASES
Floyd College's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2004 through 2005. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable
Annual Financial Report FY 2003 (Version 1.0) 21

on a monthly basis. Examples of property under operating leases are copiers and other small business equipment. In 1992, Floyd College entered into a real property operating lease with the Etowah Foundation, for classroom space in Carterville from 1992 through 1994 for annual rentals of $8,400. Over the years, addition space was added and the rent increased to the current amount of $50,000 per year. The College anticipates termination of this agreement at the end of FY05 with the completion of the new campus at Cartersville. In 1996, Floyd College entered into a real property operating lease with Webster Stein Professional Association for the Dental Hygiene Clinic in Rome for annual rentals of $38,400. In 2002 the annual rental was increased to $42,000. The college terminated the agreement at the end of FY2003 and moved the Clinic to the Heritage Hall location. In 2002, Floyd College entered into a real property operating lease with Ray Dempsey, Lynn Dempsey and Rebecca Woodard for a parking lot at the Heritage Hall site in Rome for annual rentals of $6,000. The lease is one year in duration, with an option to renew annually for four years. Noncancellable operating lease expenditures in 2003 were $97,183.30 for real property.
Annual Financial Report FY 2003 (Version 1.0) 22

Note 10. Retirement Plans

Teachers Retirement System Of Georgia

Plan Description Floyd College participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Floyd College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Floyd College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$590,820.48 $582,376.99 $719,331.94

Regents Retirement Plan

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.

Funding Policy Floyd College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statue and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation. Employees contribute 5% of their earnable

Annual Financial Report FY 2003 (Version 1.0) 23

compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.
Floyd College and the covered employees made the required contributions of $200,717.45 (10.02%) and $100,158.91 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description Floyd College participates in the Georgia Defined Contribution Plan (GDCP) which is a singleemployer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $55,586.04 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
Floyd College is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Floyd College and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue
Annual Financial Report FY 2003 (Version 1.0) 24

Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Floyd College, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Floyd College expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Floyd College (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
Note 13. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University
Annual Financial Report FY 2003 (Version 1.0) 25

System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 74 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, Floyd College recognized as incurred $247,962.65 of expenditures, which was net of $77,850.96 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 26

Note 14. Natural Classifications With Functional Classifications The College's operating expenses by functional classification for FY2003 are shown below:

Stat ement of Operat ing Expenses - Nat ural vs Func t ional Classific at ions For t he Fisc al Y ear Ended June 30, 2003
Func tional Classific at ion FY 2003

Natural C lassification

I n s tr u c tio n

Public Research Service

A c a d e m ic Support

F ac ult y Staff B enefits P erso nal Services T rav el Scho larships and F ello wships Ut ilit ies Supplies and Others Services D epreciatio n

$ 4,495,081.47 1,109,291.54 1,235,461.08
89,290.56
134,779.22 725,939.14
131.67

$ 0.00

$ 0.00

$ 6,394.00 907,335.46 201,475.17
27,307.20
10,256.02 250,241.54
96,085.21

T o tal Expenses

$ 7,789,974.68

$ 0.00

$ 0.00

$ 1,499,094.60

S tu d e n t S e r v ic e s
$ 0.00 839,660.50 198,524.77
25,370.60 22,374.60 20,944.89 166,171.95
$ 1,273,047.31

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003

Natural Classification

Institutional Support

Plant Operations & Maintenance

Functional Classification FY2003

Scholarships & Fellowships

Auxiliary Enterprises

Unallocated Expenses

Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation

$0.00 1,764,533.77 775,647.88
1,278.00 24,597.27
59,381.44 655,617.48
6,409.98

$0.00 530,084.64 155,588.09
(9,432.17) 143.00
572,530.19 533,677.37 (1,002,824.37)

$0.00 1,079,085.52

$0.00 164,277.32 35,342.73
9,432.17 537.11
6,623.37 1,056,223.03
17,001.59

$0.00 1,862,005.60

Total Expenses

$3,287,465.82

$779,766.75

$1,079,085.52

$1,289,437.32

$1,862,005.60

Total Expenses
$4,501,475.47 5,315,183.23 2,602,039.72 1,278.00 167,245.74 1,101,460.12 804,515.13 3,387,870.51 978,809.68
$18,859,877.60

Annual Financial Report FY 2003 (Version 1.0) 27

FORT VALLEY STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2003

Kofi Lomotey
President

Fort Valley State University Fort Valley, Georgia
E. Thomas Oliver
Vice President for Business & Finance

FORT VALLEY STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2003
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 8 Statement of Revenues, Expenses and Changes in Net Assets............................................ 9 Statement of Cash Flows ................................................................................................... 10 Note 1 Summary of Significant Accounting Policies ...................................................... 12 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 17 Note 3 Accounts Receivable............................................................................................. 19 Note 4 Inventories............................................................................................................. 20 Note 5 Notes/Loans Receivable........................................................................................ 20 Note 6 Capital Assets........................................................................................................ 21 Note 7 Deferred Revenue.................................................................................................. 22 Note 8 Long-Term Liabilities ........................................................................................... 22 Note 9 Lease Obligations.................................................................................................. 23 Note 10 Retirement Plans ................................................................................................. 24 Note 11 Risk Management................................................................................................ 25 Note 12 Contingencies...................................................................................................... 26 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 26 Note 14 Natural Classifications With Functional Classifications..................................... 28

FORT VALLEY STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Fort Valley State University is one of the 34 institutions of the University System of Georgia. The University, located in Fort Valley, Georgia, was founded in 1895 and has become known for its agricultural research, technology and technology-related programs. The University offers associate, baccalaureate and masters degrees in a wide variety of subjects. This wide range of educational opportunities attracts a highly qualified faculty and a student body of more than 2,000 EFT students each year, as shown by the comparison numbers that follow.

Faculty

Students

FY2003 FY2002 FY2001

148

2,054

170

2,049

182

2,093

Overview of the Financial Statements and Financial Analysis

Fort Valley State University is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2002 and FY 2003.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Fort Valley State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements.

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major
Annual Financial Report FY 2003 (Version 1.0) 1

categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

Assets: C urrent Assets C apital Assets, net Other Assets Total Assets

June 30, 2003
$5,048,348.57 28,444,885.07
2,026,557.80 35,519,791.44

June 30, 2002
$5,224,127.84 33,764,572.39
2,111,410.94 41,100,111.17

Liabilities: C urrent Liabilities Noncurrent Liabilities Total Liabilities

3,571,465.35 2,954,985.89 6,526,451.24

3,928,927.29 2,039,864.91 5,968,792.20

Net Assets: Invested in C apital Assets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects Unrestricted Total Net Assets

28,444,885.07
402,000.00
146,455.13 $28,993,340.20

33,764,572.39
940,090.89
426,655.69 $35,131,318.97

The total assets of the institution decreased by ($5,580,319.73). However, a review of the Statement of Net Assets will reveal that the decrease was primarily due to prior period adjustments of approximately $7.2 millions which related to the effect of the adoption of GASB Statement No. 34. In addition, last year's depreciation expense was computed without allowing for the residual value of assets, as such the correction of this transaction resulted in a partial offset (of more than $2.1 million) to the prior period adjustment related to the effect of the adoption of GASB Statement No. 34. The net effect of these two adjustments was approximately $5.2 million dollars. See Note 1 in the notes to the financial statements for additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets.
The total liabilities for the year increased by $557,659.04. The primary cause for the increase was due to accrued expenditures of approximately $900,000. The combination of the decrease in total assets of ($5,580,319.73) and the increase in total liabilities of $557,659.04 yields a decrease in total net assets of ($6,137,978.77). The decrease in total net assets is primarily in the
Annual Financial Report FY 2003 (Version 1.0) 2

category of invested in capital assets, net of debt in the amount of $5,319,687.32 although all categories of Net Assets did decrease during the year.

Statement of Revenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30, 2003

Operating Revenues Operating Expenses Operating Loss

$36,623,979.23 59,477,177.35 (22,853,198.12)

Nonoperating Revenues and Expenses

21,436,598.76

Income (Loss) Before other revenues, expenses, gains or losses

(1,416,599.36)

Other revenues, expenses, gains or losses

Increase in Net Assets

(1,416,599.36)

Net Assets at beginning of year, as originally reported C umulative effect of changes in accounting principle Prior Year Adjustments Net Assets at beginning of year, restated

35,131,318.97
(4,721,379.41) 30,409,939.56

Net Assets at End of Year

$28,993,340.20

June 30, 2002 $31,517,175.96
86,651,674.34 (55,134,498.38) 22,433,830.03
(32,700,668.35)
(32,700,668.35) 94,054,177.32 26,222,190.00 67,831,987.32 $35,131,318.97

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a decrease in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:
Annual Financial Report FY 2003 (Version 1.0) 3

Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

Operating Revenue Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Auxiliary Other
Total Operating Revenue
Nonoperating Revenue State Appropriations Gifts Investment Income Grants and Contracts Other
Total Nonoperating Revenue
Capital Gifts and Grants State Capital Appropriations Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

June 30, 2003

June 30, 2002

$3,135,268.69 24,243,652.11
77,301.65 4,153,179.11 5,014,577.67
36,623,979.23

$691,001.58 21,424,039.65
91,597.60 4,446,246.16 4,864,290.97
31,517,175.96

21,556,017.00 (12,165.33)
21,543,851.67

22,386,259.00 44,682.23 2,888.80
22,433,830.03

0.00 $58,167,830.90

0.00 $53,951,005.99

Annual Financial Report FY 2003 (Version 1.0) 4

Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003
$14,456,302.53 4,382,763.77 3,131,206.99 5,783,813.08 3,915,797.89 6,407,939.43 4,379,740.44
10,838,363.78 5,017,813.47 1,163,435.97
59,477,177.35
107,252.91
$59,584,430.26

June 30, 2002
$14,291,923.30 10,304,325.97 2,602,634.95 5,240,600.98 3,743,995.89 6,224,437.82 24,789,318.34 14,263,613.71 5,190,823.38
86,651,674.34
$86,651,674.34

Governmental grants and contracts increased in the amount of approximately $3,228,823.75. This is primarily a result of the increase in various grants related to the University's agriculture research, head start and cooperative extension programs.
Revenues associated with tuition and fees, net of sponsored and unsponsored scholarships, category increased approximately $2,444,267.11 during the year. This increase reflects, in part, the reduction of in the amount of sponsored and unsponsored scholarships awarded to students during the 2003 fiscal year.
The compensation and employee benefits category increased by approximately $1,200,967.90. The increase reflects a pay raise for the employees of the institution of approximately three percent with the associated fringe benefits. The increase also reflects an increased cost of health insurance for the employees of the institution.
Utilities increased by approximately $18,996.16 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2003.
Under non-operating revenues (expenses) state appropriations decreased by approximately ($830,242.00). Given the mandatory cost increases of various categories of expenses, the University actually had a relatively significant decrease in funding with all things considered.
Annual Financial Report FY 2003 (Version 1.0) 5

Statement of Cash Flows

The final statement presented by the Fort Valley State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Year Ended June 30, 2003, Condensed

Cash Provided (used) By: Operating Activities Non-capital Financing Activities Investing Activities Capital and Related Financing Activities
Net Change in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2003
($22,868,142.49) 21,448,764.09 (12,165.33) (995,138.54)
(2,426,682.27) 3,225,208.16
$798,525.89

Capital Assets

The University had one significant capital asset addition for computers in fiscal year 2003.

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Annual Financial Report FY 2003 (Version 1.0) 6

Economic Outlook The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. Even with the significant decrease in funding during the fiscal year ending June 30, 2003, the University's ability to institute a number of cost saving measures, as well as a reduction of all non-essential services, resulted in the University's financial position remaining stable. The University anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues.
_______________________ Kofi Lomotey, President Fort Valley State University
Annual Financial Report FY 2003 (Version 1.0) 7

Statement of Net Assets

FORT VALLEY STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2003
ASSETS Current Assets C ash and C ash Equivalents Short-term Investments Accounts Receivable, net Inventories Other Assets Total C urrent Assets

June 30, 2003
$798,525.89
4,041,747.62 124,037.06 84,038.00
5,048,348.57

Noncurrent Assets Noncurrent C ash Investments Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS

1,325.00 2,025,232.80 28,444,885.07 30,471,442.87 35,519,791.44

LIABILITIES Current Liabilities
Accounts Payable and Accrued Liabilities Deposits Deferred Revenue Other Liabilities Deposits Held for Other Organizations C ompensated Absences (current portion)
Total C urrent Liabilities Noncurrent Liabilities
C ompensated Absences Long-term Liabilities
Total Noncurrent Liabilities TOTAL LIABILITIES

1,513,909.61 74,944.59
798,889.92 212,563.81 143,744.90 827,412.52 3,571,465.35
1,001,776.43 1,953,209.46 2,954,985.89 6,526,451.24

NET ASSETS Invested in C apital Assets, net of related debt Restricted for Nonexpendable Expendable C apital Projects Unrestricted TOTAL NET ASSETS

28,444,885.07
402,000.00 146,455.13 $28,993,340.20

Annual Financial Report FY 2003 (Version 1.0) 8

Statement of Revenues, Expenses and Changes in Net Assets

FORT VALLEY STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2003

June 30, 2003

REVENUES

Operating Revenues

Student Tuition and Fees

$5,925,442.91

Less: Sponsored and Unsponsored Scholarships

(2,790,174.22)

Federal Appropriations

4,195,105.22

Federal Grants and Contracts

23,146,982.43

State and Local Grants and Contracts

488,113.82

Nongovernmental Grants and Contracts

608,555.86

Sales and Services of Educational Departments

77,301.65

Auxiliary Enterprises

4,153,179.11

Other Operating Revenues

819,472.45

Total Operating Revenues

36,623,979.23

EXPENSES

Operating Expenses

Salaries:

Faculty

8,205,498.00

Staff

17,168,286.47

Benefits

7,510,948.51

Other Personal Services

632.50

Travel

550,425.39

Scholarships and Fellowships

11,982,178.35

Utilities

2,316,415.66

Supplies and Other Services

10,322,656.92

Depreciation

1,420,135.55

Total Operating Expenses

59,477,177.35

Operating Income (loss) NONOPERATING REVENUES (EXPENSES)

(22,853,198.12)

State Appropriations

21,556,017.00

Gifts

Investment Income (endowments, auxiliary and other)

(12,165.33)

Interest Expense (capital assets)

(107,252.91)

Other Nonoperating Revenues

Net Nonoperating Revenues

21,436,598.76

Income before other revenues, expenses, gains, or loss

(1,416,599.36)

State Capital Appropriations

Capital Grants and Gifts

Federal Grants & Contracts

State Grants & Contracts

Other Grants and Contracts

Total Other Revenues

0.00

Increase in Net Assets NET ASSETS

(1,416,599.36)

Net Assets-beginning of year, as originally reported

35,131,318.97

Cumulative effect of changes in accounting principle

Prior Year Adjustments

(4,721,379.41)

Net Assets-beginning of year, restated

30,409,939.56

Net Assets-End of Year

$28,993,340.20

Annual Financial Report FY 2003 (Version 1.0) 9

Statement of Cash Flows
FORT VALLEY STATE UNIVERSITY STATEMENT OF CASH FLOWS
For the Year Ended June 30, 2003
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities
CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES C apital Grants and Gifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital Debt and Leases Interest Paid on C apital Debt and Leases Net C ash used by C apital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003 $5,925,442.91 28,438,757.33
77,301.65 (22,121,214.53) (25,373,784.47) (14,772,352.57)
1,636,203.98 (306,910.53)
1,647,727.40
779,711.96 396,446.30 804,528.08 (22,868,142.49) 21,556,017.00 (107,252.91) 21,448,764.09
(995,138.54)
(995,138.54)
(12,165.33) (12,165.33) (2,426,682.27) 3,225,208.16 $798,525.89

Annual Financial Report FY 2003 (Version 1.0) 10

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating Activities
Depreciation C hange in Assets and Liabilities:
Receivables, net Inventories Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($22,853,198.12)
1,420,135.55
(2,277,081.59) 114,127.73 (3,096.00) 694,043.12 798,889.92 (879,890.38) 117,927.28
($22,868,142.49)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current Assets

$798,525.89 $798,525.89

Fort Valley State University had no transactions to report under Non-Cash Investing, NonCapital Financing, and Capital and Related-Financing Transactions.

Annual Financial Report FY 2003 (Version 1.0) 11

FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations Fort Valley State University serves the state, and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity Fort Valley State University is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Fort Valley State University as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Fort Valley State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Fort Valley State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of
Annual Financial Report FY 2003 (Version 1.0) 12

materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
Basis of Accounting For financial reporting purposes, the University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-university transactions have been eliminated.
The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Consumable supplies are carried at the lower of cost or market on either the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis.
Annual Financial Report FY 2003 (Version 1.0) 13

Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Fort Valley State University when complete. For the year ended June 30, 2003, GSFIC transferred no capital additions to Fort Valley State University.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net
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Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Fort Valley State University reported accrued liability for compensated absences in the amount of $1,711,261.67 as of 7-1-2002. For FY2003, this amount was adjusted for FICA and a 360-hour maximum for a reduction of <$238,333.15>. Also in FY2003, $1,137,891.65 was earned in compensated absences and employees were paid $781,631.22 for a total net increase of $117,927.28. The ending balance as of 6-30-2003 in accrued liability for compensated absences is $1,829,188.95.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The University's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the president to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and Fiscal
Annual Financial Report FY 2003 (Version 1.0) 15

Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted Total Unrestricted Net Assets

June 30, 2003 $0.00
146,455.13 $146,455.13

When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes Fort Valley State University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues The University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees
Annual Financial Report FY 2003 (Version 1.0) 16

and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships.
Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus Fort Valley State University) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus Fort Valley State University), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Annual Financial Report FY 2003 (Version 1.0) 17

Categorization of Deposits
The University's cash deposits are categorized by risk as follows:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the University or by its agent in the University's name.
Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University's name.
Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the University's name, and amounts uncollateralized.
Cash Deposits as of June 30, 2003

Cash Deposits Investment Portfolio Accounts
Total Cash Deposits

C arrying Amount
$798,525.89 1,325.00
$799,850.89

Bank Balances
$798,525.89 1,325.00
$799,850.89

Risk Categories

1

2

$798,525.89 1,325.00

$0.00

$799,850.89

$0.00

3 $0.00
$0.00

Categorization of Investments
The University's investments are categorized as to credit risk within the three categories described below:
Category 1 - Insured or registered, or securities held by the University or its agent in the University's name
Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name.
Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University's name.

Annual Financial Report FY 2003 (Version 1.0) 18

At June 30, 2003, the University's investments consisted of the following:

Type of Investm ents
C om m on S tock C orporate Bonds S ecurities and C orporate O bligations

Risk C ategories

1

2

$0.00

$0.00

1,325.00

3 $0.00

C arrying Amount
$0.00
1,325.00

T o ta ls

$1,325.00

$0.00

$0.00

$1,325.00

Investm ents Not S ubject to C ategorizations: B oard of R egents
S hort-Term Fund Balanced Income Fund Total Return Fund Investm ent Portfolio A ccounts Mutual Funds R eal Estate S tate Investm e nt Pool S hort-Term Investm ents
Total Investm ents

$1,325.00

Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool.

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2003.

June 30, 2003

S tudent Tuition and Fees A uxiliary Enterprises and Other Operating A ctivities Fede ral, S tate , and Private Funds O the r
Less A llowance for D oubtful A ccounts

$456,041.24 318,932.52
3,266,279.39 494.47
4,041,747.62

Net A ccounts Receivable

$4,041,747.62

Annual Financial Report FY 2003 (Version 1.0) 19

Note 4. Inventories

Inventories consisted of the following at June 30, 2003.

B o o k sto re Fo o d S e rv ice s P hy sica l P la nt O the r
To ta l

June 30, 2003 $102,329.65
21,707.41 $124,037.06

Note 5. Notes/Loans Receivable
Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2003 and 2002. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The University has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2003 the allowance for uncollectible loans was approximately $472,917.33.

Annual Financial Report FY 2003 (Version 1.0) 20

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2003.

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$1,262,548.17
1,262,548.17

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

39,460,864.44 6,768,415.00
19,451,130.82
5,644,059.94
71,324,470.20

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

21,200,138.34 4,204,603.74
13,417,703.90
38,822,445.98

Total Capital Assets, Being Depreciated, Net 32,502,024.22

Capital Assets, net

$33,764,572.39

Additions $0.00 0.00

Reductions $0.00 0.00

Ending Balance 6/30/2003
$1,262,548.17 0.00
1,262,548.17

33,428.40 1,476,692.39
7,875.54 1,517,996.33

2,041,984.78 5,262,291.00 11,991,554.83
19,295,830.61

0.00 37,452,308.06
1,506,124.00 8,936,268.38
0.00 5,651,935.48
0.00 53,546,635.92

851,436.31 97,683.83
698,445.99
1,647,566.13 (129,569.80) ($129,569.80)

2,820,951.30 2,998,525.36 8,286,236.43
14,105,713.09 5,190,117.52
$5,190,117.52

0.00 19,230,623.35
1,303,762.21 5,829,913.46
0.00 0.00 0.00 26,364,299.02
27,182,336.90
$28,444,885.07

Annual Financial Report FY 2003 (Version 1.0) 21

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2003.
June 30, 2003

P re p a id T uitio n a nd Fe e s Research O th e r D e fe rre d R e v e n ue

$0.00 7 9 8 ,8 8 9 .9 2

T o ta ls

$ 7 9 8 ,8 8 9 .9 2

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2003 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total
Total Long Term Obligations

Beginning Balance July 1, 2002
$21,923.91

Additions $0.00

Reductions

Ending Balance June 30, 2003

$0.00

$21,923.91

1,711,261.67 2,017,941.00 3,729,202.67

1,001,776.43 1,001,776.43

$3,751,126.58 $1,001,776.43

883,849.15 86,655.45
970,504.60

1,829,188.95 1,931,285.55 3,760,474.50

$970,504.60 $3,782,398.41

Current Portion
$0.00
827,412.52 827,412.52 $827,412.52

(a) The beginning balance includes the amount shown as current in FY2002 and reclassified as long-term in FY2003

Annual Financial Report FY 2003 (Version 1.0) 22

Note 9. Lease Obligations
Fort Valley State University is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property.
Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2003, were as follows:

Year Ending June 30:

Year

2004

1

2005

2

2006

3

2007

4

2008

5

2009 through 2013

6-10

2014 through 2018

11-15

2019 through 2023

16-20

2024 through 2028

21-25

2029 through 2033

26-30

2034 through 2038

31-35

2039 through 2043

36-40

Total m inim um lease paym ents

Less: Interest

Less: Executory costs (if paid)

Principal O utstanding

Real Property

C apital Lease s

Operating Leases

$8,999.40 6,609.30 5,628.51 686.70

$0.00

21,923.91 $21,923.91

$0.00

CAPITAL LEASES
Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years. Expenditures for fiscal year 2003 were approximately $1,311.00.
Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms.
OPERATING LEASES
Fort Valley State University had no operating leases during the fiscal year ending 2003.

Annual Financial Report FY 2003 (Version 1.0) 23

Note 10. Retirement Plans

Teachers Retirement System Of Georgia

Plan Description Fort Valley State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Fort Valley State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Fort Valley State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$ 1,726,854.49 $ 1,647,366.55 $ 1,967,019.67

Regents Retirement Plan

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.

Funding Policy Fort Valley State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statue and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation. Employees

Annual Financial Report FY 2003 (Version 1.0) 24

contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.
Fort Valley State University and the covered employees made the required contributions of $426,678.31 (10.02%) and $ 212,914.07 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description Fort Valley State University participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $52,788.18 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
Fort Valley State University is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Fort Valley State University and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per person and dental coverage up
Annual Financial Report FY 2003 (Version 1.0) 25

to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Fort Valley State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Fort Valley State University expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Fort Valley State University (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
Note 13. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the
Annual Financial Report FY 2003 (Version 1.0) 26

group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 260 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, Fort Valley State University recognized as incurred $581,216.70 of expenditures, which was net of $214,633.50 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 27

Note 14. Natural Classifications With Functional Classifications The University's operating expenses by functional classification for FY2003 are shown below:

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003
Functional Classification FY2003

Natural Classification

Instruction

Research

Public Service

Academic Support

Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation

$8,205,498.00 1,695,661.49 2,401,544.45
135,632.95 240,185.74 118,770.97 1,646,737.54
12,271.39

$0.00 2,454,061.29
700,116.85
107,412.76 188,523.51 27,665.50 877,314.64 27,669.22

$0.00 1,649,277.08
475,847.08
119,281.17 5,987.95 35,283.76 838,041.74 7,488.21

$0.00 3,596,168.50
925,831.15
65,509.51 16,560.15 130,588.62 994,467.13 54,688.02

Total Expenses

$14,456,302.53

$4,382,763.77

$3,131,206.99

$5,783,813.08

Student Services
$0.00 2,166,935.18
511,282.56
58,063.64 299,946.14
43,212.04 834,516.97
1,841.36
$3,915,797.89

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003

Natural Classification

Institutional Support

Plant Operations & Maintenance

Functional Classification FY2003

Scholarships & Fellowships

Auxiliary Enterprises

Unallocated Expenses

Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation

$0.00 2,944,694.44 1,685,102.57
632.50 53,112.72 12,246.08 83,429.91 1,626,724.75 1,996.46

$0.00 1,716,566.64
589,633.81 (616,412.04)
1,319.07
1,736,225.94 951,482.71 924.31

$0.00 10,838,363.78

$0.00 944,921.85 221,590.04 616,412.04
10,093.57 380,365.00 141,238.92 2,553,371.44 149,820.61

$0.00 1,163,435.97

Total Expenses

$6,407,939.43

$4,379,740.44

$10,838,363.78

$5,017,813.47

$1,163,435.97

Total Expenses
$8,205,498.00 17,168,286.47 7,510,948.51 632.50 550,425.39 11,982,178.35 2,316,415.66 10,322,656.92 1,420,135.55
$59,477,177.35

Annual Financial Report FY 2003 (Version 1.0) 28

GEORGIA COLLEGE & STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2003

Georgia College & State University Milledgeville, Georgia

David G. Brown President

Harry E. Keim Vice President for Business & Finance

GEORGIA COLLEGE & STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2003
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 9 Statement of Revenues, Expenses, and Changes in Net Assets......................................... 10 Statement of Cash Flows ................................................................................................... 11 Note 1 Summary of Significant Accounting Policies ...................................................... 13 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 18 Note 3 Accounts Receivable............................................................................................. 20 Note 4 Inventories............................................................................................................. 21 Note 5 Notes/Loans Receivable........................................................................................ 21 Note 6 Capital Assets........................................................................................................ 22 Note 7 Deferred Revenue.................................................................................................. 23 Note 8 Long-Term Liabilities ........................................................................................... 23 Note 9 Lease Obligations.................................................................................................. 24 Note 10 Retirement Plans ................................................................................................. 26 Note 11 Risk Management................................................................................................ 27 Note 12 Contingencies...................................................................................................... 28 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 28 Note 14 Natural Classifications With Functional Classifications..................................... 30

GEORGIA COLLEGE & STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Georgia College & State University is one of the 34 institutions of the University System of Georgia. The University, located in Milledgeville, Georgia, was founded in 1889 as Georgia Normal and Industrial College. It later became Georgia State College for Women (GSCW). In 1967 it became Georgia College and was re-established as a co-educational institution. In 1995 the Board of Regents gave Georgia College university status, a new mission, and new name, "Georgia College & State University".

As the state's designated public liberal arts university, GC&SU is committed to combining the educational experiences typical of esteemed private liberal arts colleges with the affordability of public higher education. GC&SU is a residential learning community that emphasizes undergraduate education and offers selected graduate programs. The faculty is dedicated to challenging students and fostering excellence in the classroom and beyond. GC&SU seeks to endow its graduates with a passion for achievement, a lifelong curiosity, and exuberance for living.

GC&SU offers degree programs in the Arts & Sciences, Business, Education and Health Sciences as well as Pre-Professional and Graduate Studies. There are over 4,600 students enrolled on the Milledgeville campus.

Faculty

Students

FY2003 FY2002 FY2001

296

6,696

236

6,352

229

7,096

Overview of the Financial Statements and Financial Analysis

Georgia College & State University is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2002 and FY 2003.

Annual Financial Report FY 2003 (Version 1.0) 1

Statement of Net Assets
The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Georgia College & State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and noncurrent), and Net Assets (Assets minus Liabilities). The difference between current and noncurrent assets will be discussed in the footnotes to the financial statements.
From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.
Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed
Assets: C urrent Assets C apital Assets, net Other Assets Total Assets
Liabilities: C urrent Liabilities Noncurrent Liabilities Total Liabilities

June 30, 2003
$24,330,572.22 33,487,633.21 5,432,135.58 63,250,341.01
16,107,204.80 810,541.34
16,917,746.14

June 30, 2002
$23,092,384.00 26,205,469.04 2,885,625.88 52,183,478.92
13,559,764.92 44,451.57
13,604,216.49

Net Assets: Invested in C apital Assets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects Unrestricted Total Net Assets

33,455,392.46 2,640,662.32 4,970,975.50
5,265,564.59 $46,332,594.87

26,161,017.47 2,878,682.39 4,091,383.27
5,448,179.30 $38,579,262.43

Annual Financial Report FY 2003 (Version 1.0) 2

The total assets of the institution increased by $11,066,862.09. However, a review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $7,282,164.17 of investment in plant, net of accumulated depreciation. See Note 1 in the notes to the financial statements for additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets. Current assets and other assets also showed an increase during the year. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution.
The total liabilities for the year increased by $3,313,529.65. Non-current liabilities increased as a result of the reclassification of the non-current portion of compensated absences. All current liabilities with the exception of compensated liabilities showed slight increases as well. The combination of the increase in total assets of $11,066,862.09 and the increase in total liabilities of $3,313,529.65 yields an increase in total net assets of $7,753,332.44. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $7,294,374.99 although other categories of Net Assets did increase during the year.
Statement of Revenues, Expenses and Changes in Net Assets
Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.
Annual Financial Report FY 2003 (Version 1.0) 3

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30, 2003

Operating Revenues Operating Expenses Operating Loss

$27,303,863.26 72,405,743.75 (45,101,880.49)

Nonoperating Revenues and Expenses

30,147,775.01

Income (Loss) Before other revenues, expenses, gains or losses

(14,954,105.48)

Other revenues, expenses, gains or losses

20,205,864.94

Increase in Net Assets

5,251,759.46

Net Assets at beginning of year, as originally reported C umulative effect of changes in accounting principle Prior Year Adjustments Net Assets at beginning of year, restated

38,579,262.43
2,501,572.98 41,080,835.41

Net Assets at End of Year

$46,332,594.87

June 30, 2002 $24,330,477.90
63,891,500.52 (39,561,022.62) 28,645,689.91
(10,915,332.71) 13,895,456.80
2,980,124.09 93,853,554.90 58,254,416.56 35,599,138.34 $38,579,262.43

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:

Annual Financial Report FY 2003 (Version 1.0) 4

Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

Operating Revenue Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Auxiliary Other
Total Operating Revenue
Nonoperating Revenue State Appropriations Gifts Investment Income Grants and Contracts Other
Total Nonoperating Revenue
Capital Gifts and Grants State Capital Appropriations Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

June 30, 2003

June 30, 2002

$13,116,462.62 177,895.14 785,978.87
11,784,756.78 1,438,769.85
27,303,863.26

$11,563,079.18
815,196.28 11,189,279.09
762,923.35
24,330,477.90

30,700,901.26 43,635.63 86,947.65
15,870,115.64 (681,289.83)
46,020,310.35

29,475,894.00
(1,056.53) 13,895,456.80
(825,877.66)
42,544,416.61

4,266,742.80 69,006.50
4,335,749.30
$77,659,922.91

0.00 $66,874,894.51

Annual Financial Report FY 2003 (Version 1.0) 5

Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003
$26,919,428.92 41,019.63
248,595.89 4,126,930.29 3,048,519.34 7,355,966.57 7,279,227.43 12,226,533.25 11,405,302.88
(245,780.45)
72,405,743.75
2,419.70
$72,408,163.45

June 30, 2002
$24,178,525.71 22,401.78
319,438.12 3,838,086.27 3,090,318.90 6,503,536.39 5,391,163.64 11,417,775.58 9,130,254.13
63,891,500.52
3,269.90
$63,894,770.42

Federal grants and contracts increased in the amount of approximately $1,947,475.00. This is primarily a result of the increase in grants and contracts and miscellaneous scholarships and gifts.
Revenues associated with the residential life, net of sponsored and un-sponsored scholarships, category decreased approximately $(2,535,952.00) during the year. This decrease reflects the changing environment of residential life on the University's campus. During the year residential life eliminated some of the institutionally owned and operated on-campus housing. However, at the same time, residential life constructed over 898 beds of new housing on the campus using a third party developer in a construction and leasing relationship. The net effect to the campus is that the students actually have more on-campus residential life availability. The new construction of residential life units on the campus, due to the third party relationship with the privatized vendor, does not show on the University's financial statements due to the activity being an offbalance sheet activity for financial reporting purposes. Since the University does not own or lease these units, the revenue or expenses are also not reflected in the University's financial statements. The University is managing these units for the owner, and receives a fee for its services.
The compensation and employee benefits category increased by approximately $2,934,608.74. The increase reflects a pay raise for the employees of the institution of approximately three percent with the associated fringe benefits. The increase also reflects an increased cost of health insurance for the employees of the institution.
Annual Financial Report FY 2003 (Version 1.0) 6

Utilities increased by approximately $115,834.01 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2003.

Under non-operating revenues (expenses) state appropriations increased by approximately $1,225,007.26. While it appears that the institution received a substantial amount of new money from the state, given the mandatory cost increases of various categories of expenses, the University actually had a relatively flat funding year with all things considered.

Statement of Cash Flows

The final statement presented by the Georgia College & State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Year Ended June 30, 2003, Condensed

Cash Provided (used) By: Operating Activities Non-capital Financing Activities Investing Activities Capital and Related Financing Activities
Net Change in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2003
($45,235,814.12) 44,932,732.47 311,012.02 (1,046,397.21)
(1,038,466.84) 12,082,025.22
$11,043,558.38

Capital Assets
The University began two significant capital projects for facilities in fiscal year 2003, the Train Depot renovation as a Wellness Center, and the Special Events Facility. These two projects will be completed early in FY2004.
Georgia College & State University also added major renovations to the Herty Science Building in FY2003. The $5,136,341.91 for this project was funded by the Georgia State Finance and Investment Commission (GSFIC). Capital expenditures for this project total $4,266,742.80 and $869,599.11 covered expenditures not capitalized. This project was actually turned over to the University in a prior year; however, as a result of mis-communication the GSFIC funding for this
Annual Financial Report FY 2003 (Version 1.0) 7

project was added to the University's assets in 2003. Other renovations funded by the GSFIC included the Russell Library & Info Technology Center, the Old Governor's Mansion, and the Central Chiller Plant. These projects were not completed in FY2003 and funding will continue in FY2004. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Economic Outlook The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong. Even with a relatively flat funded year, the University was able to generate a modest increase in Net Assets. The University anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues. _______________________ David G. Brown, President Georgia College & State University
Annual Financial Report FY 2003 (Version 1.0) 8

Statement of Net Assets

G E O RG IA C O L L E G E & S TA TE U NIV E RS ITY

STA TE M E NT O F NE T A SSE TS

June 30, 2003

June 30, 2003

ASSETS

Curre nt A sse ts

C a s h a n d C a s h E q u iv a le n ts

$ 8 ,6 3 7 ,0 1 6 .2 4

S h o rt-te rm In v e s tm e n ts

A c c o u n ts R e c e iv a b le , n e t

1 4 ,3 9 1 ,0 1 6 .5 8

In v e n to rie s

1 ,2 6 5 ,0 9 4 .5 5

O th e r A s s e ts

3 7 ,4 4 4 .8 5

T o ta l C u rre n t A s s e ts

2 4 ,3 3 0 ,5 7 2 .2 2

No nc urre nt A s se ts Noncurrent C ash In v e s tm e n ts N o te s R e c e iv a b le , n e t C a p ita l A s s e ts , n e t T o ta l N o n c u rre n t A s s e ts TOTAL ASSETS

2 ,4 0 6 ,5 4 2 .1 4
3 ,0 2 5 ,5 9 3 .4 4 3 3 ,4 8 7 ,6 3 3 .2 1 3 8 ,9 1 9 ,7 6 8 .7 9 6 3 ,2 5 0 ,3 4 1 .0 1

LIA BILITIES Curre nt Lia b ilitie s
A c c o u n ts P a y a b le a n d A c c ru e d Lia b ilitie s D e p o s its D e fe rre d R e v e nue O th e r Lia b ilitie s D e p o s its H e ld fo r O th e r O rg a n iz a tio n s C o m p e n s a te d A b s e n c e s (c u rre n t p o rtio n )
T o ta l C u rre n t Lia b ilitie s No nc urre nt Lia b ilitie s
C o m p e n s a te d A b s e n c e s Lo n g -te rm Lia b ilitie s
T o ta l N o n c u rre n t Lia b ilitie s T OTA L LIA BILITIES

4 0 5 ,8 3 5 .1 0 2 8 9 ,6 1 4 .5 0 1 1 ,4 5 6 ,6 8 2 .6 9 2 ,6 1 2 ,7 4 3 .7 7 2 6 7 ,4 0 0 .3 1 1 ,0 7 4 ,9 2 8 .4 3 1 6 ,1 0 7 ,2 0 4 .8 0
7 7 8 ,3 0 0 .5 9 3 2 ,2 4 0 .7 5
8 1 0 ,5 4 1 .3 4 1 6 ,9 1 7 ,7 4 6 .1 4

NET ASSETS In v e s te d in C a p ita l A s s e ts , n e t o f re la te d d e b t R e s tric te d fo r N o n e x p e n d a b le E x p e n d a b le C a p ita l P ro je c ts U n re s tric te d TOTAL NET ASSETS

3 3 ,4 5 5 ,3 9 2 .4 6
2 ,6 4 0 ,6 6 2 .3 2 4 ,9 7 0 ,9 7 5 .5 0
5 ,2 6 5 ,5 6 4 .5 9 $ 4 6 ,3 3 2 ,5 9 4 .8 7

Annual Financial Report FY 2003 (Version 1.0) 9

Statement of Revenues, Expenses, and Changes in Net Assets
GEORGIA COLLEGE & STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2003
June 30, 2003

REVENUES

Operating Revenues

Student Tuition and Fees

$15,378,888.97

Less: Sponsored and Unsponsored Scholarships

(2,262,426.35)

Federal Appropriations

Federal Grants and Contracts

171,808.65

State and Local Grants and Contracts

6,086.49

Nongovernmental Grants and Contracts

Sales and Services of Educational Departments

785,978.87

Auxiliary Enterprises

11,784,756.78

Other Operating Revenues

1,438,769.85

Total Operating Revenues

27,303,863.26

EXPENSES

Operating Expenses

Salaries:

Faculty Staff

16,303,347.52 15,394,506.90

Benefits Other Personal Services

8,900,336.46

Travel

438,579.27

Scholarships and Fellowships

12,578,397.25

Utilities

2,137,662.12

Supplies and Other Services Depreciation

14,142,285.80 2,510,628.43

Total Operating Expenses

72,405,743.75

Operating Income (loss) NONOPERATING REVENUES (EXPENSES)

(45,101,880.49)

State Appropriations

30,700,901.26

Gifts

43,635.63

Investment Income (endowments, auxiliary and other) Interest Expense (capital assets)

86,947.65 (2,419.70)

Other Nonoperating Revenues

(681,289.83)

Net Nonoperating Revenues

30,147,775.01

Income before other revenues, expenses, gains, or loss

(14,954,105.48)

State Capital Appropriations

4,266,742.80

Capital Grants and Gifts

69,006.50

Federal Grants & Contracts

14,728,846.03

State Grants & Contracts

126,039.55

Other Grants and Contracts

1,015,230.06

Total Other Revenues

20,205,864.94

Increase in Net Assets NET ASSETS

5,251,759.46

Net Assets-beginning of year, as originally reported

38,579,262.43

Cumulative effect of changes in accounting principle

Prior Year Adjustments

2,501,572.98

Net Assets-beginning of year, restated

41,080,835.41

Net Assets-End of Year

$46,332,594.87

Annual Financial Report FY 2003 (Version 1.0) 10

Statement of Cash Flows
GEORGIA COLLEGE & STATE UNIVERSITY STATEMENT OF CASH FLOWS
For the Year Ended June 30, 2003
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities
CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES C apital Grants and Gifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital Debt and Leases Interest Paid on C apital Debt and Leases Net C ash used by C apital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003
$15,446,691.91
(63,703.29) 872,764.96 (28,316,985.19) (31,711,936.81) (14,840,823.60) (661,402.87) 521,435.31
952,480.28 3,178,135.38 5,403,289.95
413,102.49 548,424.61 1,555,904.83 111,501.85 1,355,306.07 (45,235,814.12)
29,150,074.98 (87,458.15)
15,870,115.64 44,932,732.47
(1,026,367.49) (17,610.02) (2,419.70)
(1,046,397.21)
1,881,463.46 434,583.10
(2,005,034.54) 311,012.02
(1,038,466.84) 12,082,025.22 11,043,558.38

Annual Financial Report FY 2003 (Version 1.0) 11

Statement of Cash Flows, Continued
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating Activities
Depreciation C hange in Assets and Liabilities:
Receivables, net Inventories Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($45,101,880.49)
2,510,628.43
(5,311,621.85) 52,686.06 18,275.83
173,398.00 1,471,268.98
810,494.80 140,936.12
($45,235,814.12)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current Assets

$8,637,016.24 2,406,542.14
$11,043,558.38

** NON-C ASH INVESTING, NON-C APITAL FINANC ING, AND C APITAL AND RELATED FINANC ING TRANSAC TIONS

Fixed assets acquired by incurring capital lease obligations C hange in fair value of investments recognized as a component of interest i

$5,399.20 $6,968.87

Annual Financial Report FY 2003 (Version 1.0) 12

GEORGIA COLLEGE & STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations Georgia College & State University serves the state, and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity Georgia College & State University is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Georgia College & State University as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Georgia College & State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Georgia College & State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of
Annual Financial Report FY 2003 (Version 1.0) 13

materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
Basis of Accounting For financial reporting purposes, the University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-university transactions have been eliminated.
The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the Short-term investment pool at BB&T and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Consumable supplies are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis.
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Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Georgia College & State University when complete.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues,
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Expenses, and Changes in Net Assets. Georgia College & State University had accrued liability for compensated absences in the amount of $1,712,292.90 as of 7-1-2002. For FY2003, $1,287,633.99 was earned in compensated absences and employees were paid $1,277,687.19, for a net increase of $9,946.80. There was a correction to the beginning balance at 7-1-2002 of $130,989.32 to include the FICA portion of compensated absences, so the beginning balance adjusted for FICA is $1,843,282.22. The ending balance as of 6-30-2003 in accrued liability for compensated absences is $1,853,229.02.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The University's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and
Annual Financial Report FY 2003 (Version 1.0) 16

Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

June 30, 2003

R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted Total Unrestricted Net Assets

$282,003.05 (1,389,998.89) 1,265,094.55 5,108,465.88 $5,265,564.59

When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.

Income Taxes Georgia College & State University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.

Classification of Revenues The University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:

Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.

Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.

Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees
Annual Financial Report FY 2003 (Version 1.0) 17

and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships.
Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus Georgia College & State University) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus Georgia College & State University), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
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Categorization of Deposits
The University's cash deposits are categorized by risk as follows:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the University or by its agent in the University's name.
Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University's name.
Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the University's name, and amounts uncollateralized.
Cash Deposits as of June 30, 2003

Cash Deposits Investment Portfolio Accounts
Total Cash Deposits

C arrying Amount
$6,780,671.27 234,405.54
$7,015,076.81

Bank Balances
$6,858,130.31 234,405.54
$7,092,535.85

Risk Categories

1

2

3

$476,282.30

$0.00 $6,381,848.01 234,405.54

$476,282.30

$0.00 $6,616,253.55

Categorization of Investments
The University's investments are categorized as to credit risk within the three categories described below:
Category 1 - Insured or registered, or securities held by the University or its agent in the University's name
Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name.
Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University's name.

Annual Financial Report FY 2003 (Version 1.0) 19

At June 30, 2003, the University's investments consisted of the following:

Type of Investm e nts
C om m on S tock C orporate Bonds S ecurities and C orporate O bligations

Risk C ategorie s

1

2

$1,814,176.65 839,824.73

$0.00

3 $0.00

C arrying Amount
$1,814,176.65 839,824.73

T o ta ls

$2,654,001.38

$0.00

$0.00

$2,654,001.38

Investm e nts Not S ubject to C ategorizations: B oard of R egents
S hort-Term Fund Balanced Income Fund Total Return Fund Investm e nt Portfolio A ccounts Mutual Funds R eal Estate S tate Investm ent Pool S hort-Term Investm ents
Total Investm ents

1,374,480.19 $4,028,481.57

Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool.

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2003.

S tu d e n t T u itio n a n d Fe e s A u x ilia ry E n te rp ris e s a n d O th e r O p e ra tin g A c tiv itie s Fe d e ra l, S ta te , a n d P riv a te Fu n d s O th e r
Le s s A llo w a n c e fo r D o u b tfu l A c c o u n ts
N e t A c c o u n ts R e c e iv a b le

June 30, 2003
$ 6 ,8 5 5 ,5 9 5 .3 3 5 ,2 1 8 ,2 6 8 .7 2 2 ,2 1 4 ,8 1 9 .3 3 1 1 8 ,1 1 7 .6 4
1 4 ,4 0 6 ,8 0 1 .0 2 1 5 ,7 8 4 .4 4
$ 1 4 ,3 9 1 ,0 1 6 .5 8

Annual Financial Report FY 2003 (Version 1.0) 20

Note 4. Inventories

Inventories consisted of the following at June 30, 2003.

B ookstore Food Services Physical Plant C offee House
T o ta l

June 30, 2003 $1,265,094.55
$1,265,094.55

Note 5. Notes/Loans Receivable
Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2003 and 2002. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The University has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2003 the allowance for uncollectible loans was approximately $4,479.00.

Annual Financial Report FY 2003 (Version 1.0) 21

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2003:

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$634,079.21 897,781.25
1,531,860.46

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

45,350,012.31 760,319.00
6,412,595.15 120,472.65
5,907,100.17 164,800.00
58,715,299.28

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

24,480,155.49 536,074.30
4,385,219.92 5,819.59
4,606,846.80 27,574.60
34,041,690.70

Total Capital Assets, Being Depreciated, Net 24,673,608.58

Capital Assets, net

$26,205,469.04

Additions
$0.00 3,343,077.86 3,343,077.86

Reductions
$0.00 213,069.98 213,069.98

Ending Balance 6/30/2003
$634,079.21 4,027,789.13 4,661,868.34

15,771,516.11
1,761,274.18 105,967.53 171,112.74 20,000.00
17,829,870.56

16,847,679.82
1,406,723.95 105,967.53 134,217.00 10,000.00
18,504,588.30

0.00 44,273,848.60
760,319.00 6,767,145.38
120,472.65 5,943,995.91
174,800.00 58,040,581.54

9,808,497.75 43,350.95
839,150.98 64,264.47
300,992.00 4,224.17
11,060,480.32
6,769,390.24
$10,112,468.10

15,071,616.60 57,942.52
621,930.81 1,647.42
134,217.00
15,887,354.35
2,617,233.95
$2,830,303.93

0.00 19,217,036.64
521,482.73 4,602,440.09
68,436.64 4,773,621.80
31,798.77 29,214,816.67
28,825,764.87
$33,487,633.21

Annual Financial Report FY 2003 (Version 1.0) 22

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2003.

P re p a id T u itio n a n d Fe e s R e se a rch O th e r D e fe rre d R e v e n u e
T o ta ls

June 30, 2003 $ 1 1 ,4 0 4 ,6 7 2 .4 2
5 2 ,0 1 0 .2 7 $ 1 1 ,4 5 6 ,6 8 2 .6 9

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2003 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2002

Additions

Reductions

Ending Balance June 30, 2003

$44,451.57

$5,399.20

$17,610.02

$32,240.75

Current Portion
$0.00

Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total

1,712,292.90 1,418,623.31 1,712,292.90 1,418,623.31

1,277,687.19 1,277,687.19

1,853,229.02 0.00
1,853,229.02

1,074,928.43 1,074,928.43

Total Long Term Obligations

$1,756,744.47 $1,424,022.51 $1,295,297.21 $1,885,469.77 $1,074,928.43

(a) The beginning balance includes the amount shown as current in FY2002 and reclassified as long-term in FY2003.

Annual Financial Report FY 2003 (Version 1.0) 23

Note 9. Lease Obligations
Georgia College & State University is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property.
Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2003, were as follows:

Year Ending June 30:

Year

2004

1

2005

2

2006

3

2007

4

2008

5

2009 through 2013

11-15

2014 through 2018

16-20

2019 through 2023

21-25

2024 through 2028

26-30

2029 through 2033

31-35

2034 through 2038

36-40

2039 through 2043

36-40

Total m inim um lease paym ents

Less: Interest

Less: Executory costs (if paid)

Principal O utstanding

Real Property

C apital Lease s

Operating Leases

$27,679.99 3,153.24 1,776.00 1,776.00 592.00

$41,842.00 24,922.00 25,666.00 26,446.00
113,954.00 50.00 50.00 50.00 50.00

34,977.23 2,736.48
$32,240.75

$233,030.00

CAPITAL LEASES

Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2004 and 2012. Expenditures for fiscal year 2003 were $20,029.73 of which $2,419.71 represented interest. Total principal paid on capital leases was $17,610.02 for the fiscal year ended June 30, 2003. Interest rates range from 6.2 percent to 8.3 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2003:

Equipment Totals

$ 32,240.75 $ 32,240.75

Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms.

Annual Financial Report FY 2003 (Version 1.0) 24

Georgia College & State University has various capital leases for equipment with an outstanding balance at June 30, 2003 in the amount of $32,240.75. OPERATING LEASES Georgia College & State University's non-cancelable operating leases having remaining terms of one year and expire in fiscal year 2004. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment. In July 2002, Georgia College & State University entered into a real property operating lease with the Georgia College Alumni Association, a related party, for office space from 2003 through 2004 for monthly rentals of $950.00. The agreement does not contain a renewal option. Under this agreement, the University paid $11,400.00 in the current year. On January 30, 2001, Georgia College & State University entered into a real property operating lease with McComb Family Trust for additional Bookstore space. The monthly rent of $1,900.00 increased in 2003 to $1,957.00. This operating lease will be considered for renewal in 2011. Under this agreement, the lessor paid the lessee $23,484.00 in the current year. On July 1, 2002, Georgia College & State University entered into a real property operating lease with J. Chambers for storage space at a monthly rental of $500.00. This operating lease was renewed July 1, 2003 to extend the lease to June 30, 2004. Under this agreement, the lessor paid the lessee $6,000.00 in the current year. Non-cancelable operating lease expenditures in 2003 were $40,884.00 for real property.
Annual Financial Report FY 2003 (Version 1.0) 25

Note 10. Retirement Plans

Teachers Retirement System Of Georgia

Plan Description Georgia College & State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Georgia College & State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Georgia College & State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$1,768,795.95 $1,700,531.89 $1,971,616.64

Regents Retirement Plan

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.

Funding Policy Georgia College and State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statue and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation.

Annual Financial Report FY 2003 (Version 1.0) 26

Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.
Georgia College & State University and the covered employees made the required contributions of $1,008,647.25 (10.02%) and $507,064.88 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description Georgia College & State University participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $37,361.88 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
Georgia College & State University is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Georgia College & State University and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per
Annual Financial Report FY 2003 (Version 1.0) 27

person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Georgia College & State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Georgia College & State University expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Georgia College & State University (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
Note 13. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the
Annual Financial Report FY 2003 (Version 1.0) 28

group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 233 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, Georgia College & State University recognized as incurred $635,671.33 of expenditures, which was net of $284,869.45 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 29

Note 14. Natural Classifications With Functional Classifications The University's operating expenses by functional classification for FY2003 are shown below:

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003
Functional Classification FY2003

Natural C lassification

Instruction

Research

Public Service

Academic Support

Faculty Staff B enef it s Perso nal Services Travel Scho larships and Fello wships Utilities Supplies and Others Services Depreciatio n

$ 16,134,334.02 2,916,382.83 4,421,647.81
229,873.56
208,142.22 2,965,186.00
43,862.48

$ 0.00 14,210.53
731.95 4,271.92
21,805.23

$ 0.00 92,088.34 25,941.07
45.81
1,767.33 128,591.48
161.86

$ 84,371.00 2,220,393.58
576,184.21
57,301.71
38,781.78 831,578.60 318,319.41

To tal Expenses

$ 26,919,428.92

$ 41,019.63

$ 248,595.89

$ 4,126,930.29

Student Services
$ 3,586.96 1,889,003.91 475,298.86
69,809.82
58,437.56 552,382.23
$ 3,048,519.34

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003

Natural Classification

Institutional Support

Plant Operations & Maintenance

Functional Classification FY2003

Scholarships & Fellowships

Auxiliary Enterprises

Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation

$0.00 3,782,094.43 2,047,930.74
42,911.54
71,116.78 1,401,481.53
10,431.55

$0.00 3,180,918.03 1,014,885.43 (1,216,782.86)
4,268.52
1,376,241.42 966,027.56 1,953,669.33

$0.00 12,226,533.25

$81,055.54 1,299,415.25
337,716.39 1,216,782.86
30,096.39 351,864.00 383,175.03 7,275,233.17 429,964.25

Total Expenses

$7,355,966.57

$7,279,227.43

$12,226,533.25

$11,405,302.88

Unallocated Expenses $0.00
(245,780.45) ($245,780.45)

Total Expenses
$16,303,347.52 15,394,506.90 8,900,336.46 0.00 438,579.27 12,578,397.25 2,137,662.12 14,142,285.80 2,510,628.43
$72,405,743.75

Annual Financial Report FY 2003 (Version 1.0) 30

GAINESVILLE COLLEGE
Financial Report
For the Year Ended June 30, 2003

Gainesville College Gainesville, Georgia

Dr. Martha T. Nesbitt
President

Bob Howington
Vice President for Fiscal Affairs

GAINESVILLE COLLEGE ANNUAL FINANCIAL REPORT
FY 2003
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 7 Statement of Revenues, Expenses and Changes in Net Assets............................................ 8 Statement of Cash Flows ..................................................................................................... 9 Note 1 Summary of Significant Accounting Policies ...................................................... 11 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 16 Note 3 Accounts Receivable............................................................................................. 18 Note 4 Inventories............................................................................................................. 18 Note 5 Notes/Loans Receivable........................................................................................ 18 Note 6 Capital Assets........................................................................................................ 19 Note 7 Deferred Revenue.................................................................................................. 20 Note 8 Long-Term Liabilities ........................................................................................... 20 Note 9 Lease Obligations.................................................................................................. 20 Note 10 Retirement Plans ................................................................................................. 21 Note 11 Risk Management................................................................................................ 22 Note 12 Contingencies...................................................................................................... 23 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 23 Note 14 Natural Classifications With Functional Classifications..................................... 25

GAINESVILLE COLLEGE
Management's Discussion and Analysis

Introduction

Gainesville College is one of the 34 institutions of the University System of Georgia. The College, located just south of Gainesville, Georgia, was founded in 1964 and has become known for its quality academic programs supported by state-of-the-art technology and strong academic support with a focus on student success. In 2002-03 the College opened a campus in Oconee County, near Athens, that serves almost 1800 students. Gainesville College offers associate degrees in a wide variety of disciplines and selected career programs and certificates. The institution's quality and reputation are attracting a highly qualified faculty and staff and an increasing enrollment of students. The enrollment growth is indicated by the following data:

Faculty* Students

FY2003 FY2002 FY2001

392

10,390

351

9,010

315

8,001

*Represents a total of full-time and part-time faculty.

Overview of the Financial Statements and Financial Analysis

Gainesville College is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2002 and FY 2003.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Gainesville College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements.

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.
Annual Financial Report FY 2003 (Version 1.0) 1

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets

June 30, 2003
$3,412,601.70 19,197,099.28
306,891.10 22,916,592.08

June 30, 2002
$3,020,810.64 18,663,896.12
21,684,706.76

Lia b ilitie s : C urre nt Liabilities Noncurrent Liabilities Total Liabilities

1,699,956.55 172,859.93
1,872,816.48

1,507,757.35 1,507,757.35

Net A ssets: Invested in C apital A ssets, ne t of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets

17,472,474.01 10,722.50
491,240.16
3,069,338.93 $21,043,775.60

18,663,896.12 10,722.50
474,014.05
1,028,316.74 $20,176,949.41

The total assets of the institution increased by $1,231,885.32. However, a review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $533,203.16 of investment in plant, net of accumulated depreciation. See Note 1 in the notes to the financial statements for additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets. Many of the other asset categories of the College, current and non-current, also increased during the year. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution.
The total liabilities for the year increased by $365,059.13. The primary cause for the increase was in current liabilities, primarily an increase of $339,068.38 in deferred revenue, which can be attributed directly to the increase in summer semester enrollment. The combination of the increase in total assets of $1,231,885.32 and the increase in total liabilities of $365,059.13 yields
Annual Financial Report FY 2003 (Version 1.0) 2

an increase in total net assets of $866,826.19. The increase in total net assets is primarily in the category of unrestricted net assets.

Statement of Revenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30, 2003

Operating Revenues Operating Expenses Operating Loss

$9,573,180.06 21,556,844.60 (11,983,664.54)

Nonoperating Revenues and Expenses

11,114,401.82

Incom e (Loss) B efore other revenues, expenses, gains or losses

(869,262.72)

Other revenues, expenses, gains or losses

741,301.60

Increase in Net Assets

(127,961.12)

Net Assets at beginning of year, as originally reported C um ulative effect of changes in accounting principle Prior Year Adjustm ents Net Assets at beginning of year, restated

20,176,949.41
994,787.31 21,171,736.72

Net Assets at End of Year

$21,043,775.60

June 30, 2002 $8,098,896.65 22,741,022.72 (14,642,126.07) 11,288,184.73
(3,353,941.34) 828,408.72
(2,525,532.62) 35,024,622.66 12,322,140.63 22,702,482.03 $20,176,949.41

The Statement of Revenues, Expenses, and Changes in Net Assets reflect a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:

Annual Financial Report FY 2003 (Version 1.0) 3

Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

Operating Revenue Tuition and Fees G rants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O th e r
Total Operating Revenue
Nonoperating Revenue State Appropriations G ifts Investment Incom e G rants and C ontracts O th e r
Total Nonoperating Revenue
C apital Gifts and G rants State C apital Appropriations Other C apital G ifts and Grants
Total C apital G ifts and G rants
Total Revenues

June 30, 2003

June 30, 2002

$5,126,158.50 2,290,479.13 295,691.74 1,779,471.10 81,379.59
9,573,180.06

$4,307,028.06 1,836,471.01 463,368.75 1,433,935.02 58,093.81
8,098,896.65

11,223,384.00
21,795.67 741,301.60 (130,777.85)
11,855,703.42

11,260,852.00 27,332.73
828,408.72
12,116,593.45

0.00 $21,428,883.48

0.00 $20,215,490.10

Annual Financial Report FY 2003 (Version 1.0) 4

Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003 $9,068,974.55
145,957.80 2,725,562.29 1,948,571.43 2,600,653.38 2,343,650.53 1,260,814.63 1,462,659.99
21,556,844.60
$21,556,844.60

June 30, 2002 $9,228,317.55
155,694.75 2,438,789.36 1,700,801.79 2,932,279.62 3,609,923.32 1,469,253.40 1,205,962.93
22,741,022.72
$22,741,022.72

Revenues of the College increased in almost every area, with the largest increase in tuition and fees, net of Sponsored and Unsponsored Scholarships.
Two areas showed a decrease: Sales and Services of Educational Departments and Nonoperating Grants and Contracts. The decrease in Sales and Services of Educational Departments was due to the decline in the economy. The College's Continuing Education Department offers custom- designed classes to fit the needs of local companies. With the downturn in the economy, local companies had fewer dollars available for these purposes. Non-operating Grants and Contracts decreased due to the budget cuts of the granting agencies.
The compensation and employee benefits category increased by approximately $846,857.79. The increase reflects the hiring of administration and staff for the Oconee campus opened during the 2003 Fiscal Year. The increase also reflects an increased cost of health insurance for the employees of the institution.
Utilities decreased by approximately ($1,533,421.19) during the past year. The decrease was primarily associated with the decreased electrical power rates for fiscal year 2003. The College received a lower rate from the power company and a sizable credit due to this lower rate.
Under non-operating revenues (expenses) state appropriations decreased by approximately ($37,468.00). The College actually had a relatively flat funding year with all things considered.

Annual Financial Report FY 2003 (Version 1.0) 5

Statement of Cash Flows

The final statement presented by the Gainesville College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Year Ended June 30, 2003 Condensed

C ash Provided (used) By: O perating A ctiv ities Non-capital Financing A ctivities Investing A ctivities C apital and Related Financing A ctivities
Net C hange in C ash C ash, Beginning of Year
C ash, End of Year

June 30, 2003
($ 1 1 ,2 5 2 ,5 1 5 .0 5 ) 1 2 ,1 1 2 ,6 8 8 .9 3 2 1 ,7 9 5 .6 7 (2 8 6 ,4 1 6 .7 9 )
5 9 5 ,5 5 2 .7 6 1 ,9 9 2 ,4 9 7 .0 3
$ 2 ,5 8 8 ,0 4 9 .7 9

Capital Assets
For information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Economic Outlook
The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is strong. The College does anticipate that the current fiscal year will be tight due to state budget cuts and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues.
__________________________ Dr. Martha T. Nesbitt, President Gainesville College
Annual Financial Report FY 2003 (Version 1.0) 6

Statement of Net Assets

GAINESVILLE C OLLEGE STATEMENT OF NET ASSETS
June 30, 2003
ASSETS Current Assets C ash and C ash Equivalents S hort-term Investm ents A ccounts Receivable, net I n v e n to r ie s Othe r A ssets Total C urrent A ssets
Noncurrent Assets Noncurrent C ash Investm ents Notes Receivable, net C apital A ssets, net Total Noncurrent A ssets TOTAL ASSETS
LIA BILIT IE S Current Liabilities A ccounts Payable and A ccrued Liabilities D eposits Deferred Revenue Othe r Liabilities D eposits He ld for Other Organizations C om pensated A bsences (current portion) Total C urrent Liabilities Noncurrent Liabilities C om pensated A bsences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES
NET ASSETS Invested in C apital A ssets, net of related debt Restricted for No ne x p e nd a b le Ex p e nd a b le C apital Projects U n r e s tr ic te d TOTAL NET ASSETS

June 30, 2003
$2,281,158.69 466,212.73 148,467.05 516,763.23
3,412,601.70
306,891.10
19,197,099.28 19,503,990.38 22,916,592.08
46,428.33 1,089,320.69
11,798.93 122,564.28 429,844.32 1,699,956.55 172,859.93 172,859.93 1,872,816.48
17,472,474.01 10,722.50
491,240.16 3,069,338.93 $21,043,775.60

Annual Financial Report FY 2003 (Version 1.0) 7

Statement of Revenues, Expenses and Changes in Net Assets

GAINESVILLE COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2003
June 30, 2003

REVENUES

Operating Revenues

Student Tuition and Fees

$5,818,774.87

Less: Sponsored and Unsponsored Scholarships

(692,616.37)

Federal Appropriations

Federal Grants and Contracts State and Local Grants and Contracts

1,990,884.61 229,718.52

Nongovernmental Grants and Contracts

69,876.00

Sales and Services of Educational Departments

295,691.74

Auxiliary Enterprises

1,779,471.10

Other Operating Revenues

81,379.59

Total Operating Revenues

9,573,180.06

EXPENSES

Operating Expenses

Salaries:

Faculty Staff

5,673,122.00 6,000,951.47

Benefits Other Personal Services

3,168,659.99

Travel

138,194.56

Scholarships and Fellowships

1,260,814.63

Utilities

703,353.50

Supplies and Other Services Depreciation

4,139,439.97 472,308.48

Total Operating Expenses

21,556,844.60

Operating Income (loss) NONOPERATING REVENUES (EXPENSES)

(11,983,664.54)

State Appropriations

11,223,384.00

Gifts

Investment Income (endowments, auxiliary and other) Interest Expense (capital assets)

21,795.67

Other Nonoperating Revenues

(130,777.85)

Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss

11,114,401.82 (869,262.72)

State Capital Appropriations

Capital Grants and Gifts

Federal Grants & Contracts

19,581.88

State Grants & Contracts

598,781.29

Other Grants and Contracts

122,938.43

Total Other Revenues

741,301.60

Increase in Net Assets NET ASSETS

(127,961.12)

Net Assets-beginning of year, as originally reported

20,176,949.41

Cumulative effect of changes in accounting principle

Prior Year Adjustments

994,787.31

Net Assets-beginning of year, restated

21,171,736.72

Net Assets-End of Year

$21,043,775.60

Annual Financial Report FY 2003 (Version 1.0) 8

Statement of Cash Flows
GAINESVILLE C OLLEGE STATEMENT OF C ASH FLOWS For the Year Ended June 30, 2003
CA SH F LOWS F ROM OPE RA T ING A CT IVIT IES Tuition and Fees Federal A ppropriations G rants and C ontracts (Exchange) S ales and S ervices of Educational D epartm ents Paym ents to S uppliers Paym ents to Em ployees Paym ents for S cholarships and Fellowships Loans Issued to S tudents and Em ployees C ollection of Loans to S tudents and Em ployees A uxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health S ervices Intercollegiate A thletics O ther Organizations Other Receipts (paym ents) Net C ash Provided (used) by Operating A ctivities
CA SH F LOWS F ROM NON- CA PIT A L F INA NCING A CT IVIT IE S S tate A ppropriations A gency Funds Transactions G ifts and G rants Re ceived for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing A ctivities
CA SH F LOWS F ROM CA PIT A L A ND RELA T ED F INA NCING A CT IVIT IES C apital G rants and G ifts Received Proceeds from sale of C apital A ssets Purchases of C apital A ssets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Re lated Financing A ctivities
CA SH F LOWS F ROM INVEST ING A CT IVIT IES Proceeds from S ale s and Maturities of Investm e nts Interest on Investm ents Purchase of Investm ents Net C ash Provided (used) by Investing A ctivities Net Increase/Decrease in C ash C ash and C ash Equivale nts - B eginning of year C ash and C ash Equivale nts - End of Year

June 30, 2003 $5,938,679.28
2,420,192.00 295,691.74
(8,165,609.93) (11,674,073.47)
(1,953,431.00)
1,744,850.35 7,822.76 1,450.40
24,280.16 107,632.66 (11,252,515.05) 11,223,384.00 (38,454.77) 927,759.70 12,112,688.93
(286,416.79)
(286,416.79)
21,795.67 21,795.67 595,552.76 1,992,497.03 $2,588,049.79

Annual Financial Report FY 2003 (Version 1.0) 9

Statement of Cash Flows, Continued
RECONCILIA T ION OF OPERA T ING LOSS T O NET CA SH PROVIDE D (USED) BY OPE RA T ING A CT IVIT IE S:
O perating Incom e (loss) A djustm ents to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating A ctivities
D epreciation C hange in A ssets and Liabilities:
Receivables, net I n v e n to r ie s O ther A ssets A ccounts Payable Deferred Revenue O ther Liabilities C om pensated A bsences
Net C ash Provided (used) by Operating A ctivities

($11,983,664.54)
472,308.48
41,870.79 (4,907.27) (14,662.74) (1,525.08) 223,790.70 7,449.76 6,824.85
($11,252,515.05)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivale nts C lassified as C urrent A ssets C ash and C ash Equivale nts C lassified as Non-current A ssets

$2,281,158.69 306,891.10
$2,588,049.79

Gainesville College had no transactions to report under Non-Cash Investing, Non-Capital Financing, and Capital and Related-Financing Transactions.

Annual Financial Report FY 2003 (Version 1.0) 10

GAINESVILLE COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations Gainesville College serves the state, and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity Gainesville College is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Gainesville College as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Gainesville College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Gainesville College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the College is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of
Annual Financial Report FY 2003 (Version 1.0) 11

materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
Basis of Accounting For financial reporting purposes, the college is considered a special-purpose government engaged only in business-type activities. Accordingly, the college's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-college transactions have been eliminated.
The College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The college accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the college's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Consumable supplies are carried at the lower of cost or market on either the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis.
Annual Financial Report FY 2003 (Version 1.0) 12

Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the college's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Gainesville College when complete.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a college residence hall.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Gainesville College had accrued liability for compensated
Annual Financial Report FY 2003 (Version 1.0) 13

absences in the amount of $568,654.90 as of 7-1-2002. This amount was adjusted by $27,224.50 for FICA to obtain a new accrued liability of $595,879.40. For FY2003, $458,952.59 was earned in compensated absences and employees were paid $452,127.74, for a net increase of $6,824.85. The ending balance as of 6-30-2003 in accrued liability for compensated absences is $602,704.25.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The college's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the college's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The college may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the college is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the college is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the college, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations $2,571.14 (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff.
Annual Financial Report FY 2003 (Version 1.0) 14

Unrestric ted Net Assets inc ludes the following items whic h are quasi-restric ted by management.

R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted Total Unrestricted Net Assets

June 30, 2003
$39.37 (69,151.02) 148,467.05 2,989,983.53 $3,069,338.93

When an expense is incurred that can be paid using either restricted or unrestricted resources, the college's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes Gainesville College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the college, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the college has recorded contra revenue for sponsored and unsponsored scholarships.

Annual Financial Report FY 2003 (Version 1.0) 15

Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus Gainesville College) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus Gainesville College), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Annual Financial Report FY 2003 (Version 1.0) 16

Categorization of Deposits

The College's cash deposits are categorized by risk as follows:

Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the College or by its agent in the College's name.

Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the College's name.

Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the College's name, and amounts uncollateralized.

Cash Deposits as of June 30, 2003

Cash Deposits Investment Portfolio Accounts
Total Cash Deposits

C arrying Amount
$2,171,295.00

Bank Balances
$2,585,989.79

Risk Categories

1

2

$414,684.70 $2,181,305.09

$2,171,295.00 $2,585,989.79 $414,684.70 $2,181,305.09

3 $0.00
$0.00

Categorization of Investments
The College's investments are categorized as to credit risk within the three categories described below:
Category 1 - Insured or registered, or securities held by the College or its agent in the College's name
Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the College's name.
Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the College's name.
At June 30, 2003, the College had no investments.

Annual Financial Report FY 2003 (Version 1.0) 17

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2003.

June 30, 2003

S tudent Tuition and Fees A uxiliary Enterprises and Other Operating A ctivities Fede ral, S tate, and Private Funds O the r
Less A llowance for D oubtful A ccounts

$314,539.27 1,272.04
160,150.99 (7,696.57)
468,265.73 2,053.00

Net A ccounts Receivable

$466,212.73

Note 4. Inventories Inventories consisted of the following at June 30, 2003.

B o o k s to r e Food S ervices Physical Plant O th e r
T o ta l

June 30, 2003 $148,467.05
$148,467.05

Note 5. Notes/Loans Receivable At June 30, 2003, the College had no notes/loans receivable.

Annual Financial Report FY 2003 (Version 1.0) 18

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2003.

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$105,849.29
105,849.29

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

1,810,085.00 25,117,160.00
1,094,105.00 1,904,452.72
1,908,875.70
31,834,678.42

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

1,497,490.91 7,815,892.70
952,366.41 1,306,094.12
1,704,787.45
13,276,631.59

Total Capital Assets, Being Depreciated, Net 18,558,046.83

Capital Assets, net

$18,663,896.12

Additions
$0.00 9,755.80 9,755.80

Reductions $0.00 0.00

Ending Balance 6/30/2003
$105,849.29 9,755.80
115,605.09

51,956.50
354,737.05
62,261.72 9,979.00
478,934.27

1,490,211.50
24,627.00 272,112.07
35,185.00 9,979.00
1,832,114.57

371,830.00 25,117,160.00
1,069,478.00 1,987,077.70
0.00 1,935,952.42
0.00 30,481,498.12

82,022.80 770,858.57 170,065.56 210,889.20

1,413,931.93 1,552,444.84
117,914.00 66,922.02

75,934.00

35,185.00

1,309,770.13

3,186,397.79

(830,835.86) (1,354,283.22)

($821,080.06) ($1,354,283.22)

165,581.78 7,034,306.43 1,004,517.97 1,450,061.30
0.00 1,745,536.45
11,400,003.93
19,081,494.19
$19,197,099.28

Annual Financial Report FY 2003 (Version 1.0) 19

Note 7. Deferred Revenue

Deferred revenue consists of the following at June 30, 2003.

Prepaid Tuition and Fees Research O ther D eferred Revenue
T o ta ls

June 30, 2003 $938,744.03 150,576.66
$1,089,320.69

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2003 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total
Total Long Term Obligations

Beginning Balance July 1, 2002
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2003

$0.00

$0.00

568,654.90

486,177.09

568,654.90

486,177.09

$568,654.90 $486,177.09

452,127.74

602,704.25

452,127.74

602,704.25

$452,127.74 $602,704.25

Current Portion
$0.00
429,844.32 429,844.32 $429,844.32

(a) The beginning balance includes the amount shown as current in FY2002 and reclassified as long-term in F

Note 9. Lease Obligations Gainesville College has no lease obligations.

Annual Financial Report FY 2003 (Version 1.0) 20

Note 10. Retirement Plans

Teachers Retirement System Of Georgia

Plan Description Gainesville College participates in the Teachers Retirement System of Georgia (TRS), a costsharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Gainesville College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Gainesville College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$740,823.51 $722,567.71 $852,405.94

Regents Retirement Plan

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.

Funding Policy Gainesville College makes monthly employer contributions for the Regents Retirement plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation. Employees contribute 5% of

Annual Financial Report FY 2003 (Version 1.0) 21

their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.
Gainesville College and the covered employees made the required contributions of $740,823.51(10.02) and $400,879.89 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description Gainesville College participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $55,342.15 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
Gainesville College is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Gainesville College and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue
Annual Financial Report FY 2003 (Version 1.0) 22

Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Gainesville College, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Gainesville College expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Gainesville College (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
Note 13. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University
Annual Financial Report FY 2003 (Version 1.0) 23

System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 83 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, Gainesville College recognized as incurred $292,516.66 of expenditures, which was net of $123,311.67 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 24

Note 14. Natural Classifications With Functional Classifications

The College's operating expenses by functional classification for FY2003 are shown below:

Functional C lassification FY2003

Natural C lassification

Instruction

Research

Public Service

Academic Support

Student Services

Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities
Supplies and Others Services Depreciation

$5,660,431.66 1,076,182.75 1,532,017.93
69,819.48
94,702.63 635,313.48
506.62

$0.00

$0.00 115,445.42
19,113.86
2,389.98
362.10 8,646.44

$8,883.34 1,512,042.43
387,008.46
20,410.34
42,534.39 667,428.23
87,255.10

$30.00 1,245,076.60
290,187.25
24,075.57
21,237.20 367,964.81

Total Expenses

$9,068,974.55

$0.00

$145,957.80 $2,725,562.29 $1,948,571.43

Natural Classification

Institutional Support

Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities
Supplies and Others Services Depreciation

$3,777.00 1,280,688.72
720,099.13
20,368.92
17,965.42 556,094.29
1,659.90

Total Expenses

$2,600,653.38

Plant Operations & Maintenance

Functional Classification FY2003

Scholarships & Fellowships

Auxiliary Unallocated Enterprises Expenses

Total Expenses

$0.00 698,867.38 190,452.87 (39,535.86)
988.03
524,221.32
585,809.30 382,847.49

$0.00 1,260,814.63

$0.00 72,648.17 29,780.49 39,535.86
142.24
2,330.44
1,318,183.42 39.37

$0.00

$5,673,122.00 6,000,951.47 3,168,659.99 0.00 138,194.56 1,260,814.63 703,353.50
4,139,439.97 472,308.48

$2,343,650.53 $1,260,814.63 $1,462,659.99

$0.00

$21,556,844.60

Annual Financial Report FY 2003 (Version 1.0) 25

GEORGIA PERIMETER COLLEGE
Financial Report
For the Year Ended June 30, 2003

Georgia Perimeter College Decatur, Georgia

Jacquelyn M. Belcher
President

Ronald L. Carruth
Senior Vice President for Fiscal Affairs

GEORGIA PERIMETER COLLEGE ANNUAL FINANCIAL REPORT FY 2003
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 7 Statement of Revenues, Expenses and Changes in Net Assets............................................ 8 Statement of Cash Flows ..................................................................................................... 9 Note 1 Summary of Significant Accounting Policies ...................................................... 11 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 16 Note 3 Accounts Receivable............................................................................................. 18 Note 4 Inventories............................................................................................................. 19 Note 5 Notes/Loans Receivable........................................................................................ 19 Note 6 Capital Assets........................................................................................................ 20 Note 7 Deferred Revenue.................................................................................................. 21 Note 8 Long-Term Liabilities ........................................................................................... 21 Note 9 Lease Obligations.................................................................................................. 22 Note 10 Retirement Plans ................................................................................................. 23 Note 11 Risk Management................................................................................................ 24 Note 12 Contingencies...................................................................................................... 25 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 25 Note 14 Natural Classifications With Functional Classifications..................................... 27

GEORGIA PERIMETER COLLEGE
Management's Discussion and Analysis

Introduction

Georgia Perimeter College is one of the 34 institutions of the University System of Georgia. The College has six convenient locations along the major access corridors of metropolitan Atlanta. Georgia Perimeter College was founded by the DeKalb Board of Education in 1958. It became a college in 1964. Georgia Perimeter College is the largest two-year college and the third largest institution in the University System. The institution continues to grow as shown by the comparison numbers that follow.

Faculty

Students

FY2003 FY2002 FY2001

330

17,573

328

15,372

312

13,708

Overview of the Financial Statements and Financial Analysis

Georgia Perimeter College is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2002 and FY 2003.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Georgia Perimeter College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements.

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major
Annual Financial Report FY 2003 (Version 1.0) 1

categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

A sse ts: C urrent A ssets C apital A ssets, net O the r A ssets Total A ssets

June 30, 2003
$16,648,717.56 113,018,543.29
57,811.78 129,725,072.63

June 30, 2002
$15,836,112.27 90,622,481.76 15,110.99
106,473,705.02

Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities

12,038,781.60 16,745,011.91 28,783,793.51

7,460,229.11 15,388,188.51 22,848,417.62

Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets

96,016,750.81 50,150.81
129,509.27 1,000,215.54 3,744,652.69 $100,941,279.12

79,357,941.21 38,740.22
589,795.20 3,603,768.50
35,042.27 $83,625,287.40

The total assets of the institution increased by $23,251,367.61. However, a review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $22,396,061.53 of investment in plant, net of accumulated depreciation. See Note 1 in the notes to the financial statements for additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets. Many of the other asset categories, current and noncurrent, showed a decrease during the year. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution.
The total liabilities for the year increased by $5,935,375.89. The combination of the increase in total assets of $23,251,367.61 and the increase in total liabilities of $5,935,375.89 yields an increase in total net assets of $17,315,991.72. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $16,658,809.60 although all categories of Net Assets did increase during the year.
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Statement of Revenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30, 2003

Operating Revenues Operating Expenses Operating Loss

$45,936,776.26 97,449,722.07 (51,512,945.81)

Nonoperating Revenues and Expenses

46,828,208.96

Incom e (Loss) B efore other revenues, expenses, gains or losses

(4,684,736.85)

Other revenues, expenses, gains or losses

19,727,623.33

Increase in Net Assets

15,042,886.48

Net Assets at beginning of year, as originally reporte C um ulative effect of changes in accounting principle Prior Year Adjustm ents Net Assets at beginning of year, restated

83,625,287.40
2,273,105.24 85,898,392.64

Net Assets at End of Year

$100,941,279.12

June 30, 2002 $35,008,948.93
81,841,606.72 (46,832,657.79) 36,902,886.87
(9,929,770.92) 6,624,337.73 (3,305,433.19) 147,417,397.94 60,486,677.35 86,930,720.59 $83,625,287.40

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:

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Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

Operating Revenue Tuition and Fees Grants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O th e r
Total Operating Revenue
Nonoperating Revenue State Appropriations G ifts Investment Incom e Grants and C ontracts O th e r
Total Nonoperating Revenue
C apital Gifts and G rants State C apital Appropriations Other C apital G ifts and Grants
Total C apital G ifts and G rants
Total Revenues

June 30, 2003

June 30, 2002

$25,724,699.74 14,927,507.13 1,629,551.41 2,285,967.15 1,369,050.83
45,936,776.26

$20,645,000.86 10,699,538.20 1,203,657.17 1,808,942.09 651,810.61
35,008,948.93

47,783,503.00 76,778.13
(180,818.92) 47,679,462.21

49,277,428.00 263,573.97
(12,161,901.95) 37,379,100.02

19,727,623.33

6,624,337.73

19,727,623.33 $113,343,861.80

6,624,337.73 $79,012,386.68

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Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003
$36,243,729.98
23,493.17 8,001,869.98 8,481,271.67 14,891,407.67 11,577,424.40 13,138,975.33 1,625,937.10 3,465,612.77
97,449,722.07
851,253.25
$98,300,975.32

June 30, 2002
$31,748,884.37
87,752.09 7,740,521.36 7,715,131.96 13,257,617.72 9,994,087.88 9,609,910.04 1,687,701.30
81,841,606.72
476,213.15
$82,317,819.87

Federal grants and contracts increased in the amount of approximately $4,000,000.00. This is primarily a result of an increase in Pell Grant awards due to the increase in student enrollment.
Tuition and Fee revenue increased by $5,000,000.00 due to an increase in enrollment.
The compensation and employee benefits category increased by approximately $6,807,013.81. The increase reflects a pay raise for the employees of the institution of approximately three percent with the associated fringe benefits. The increase also reflects an increased cost of health insurance for the employees of the institution.
Utilities increased by approximately $364,230.48 during the past year. The increase was primarily associated with the addition of one new facility on the Lawrenceville Campus. This building was opened in August 2003.
Under non-operating revenues (expenses) state appropriations decreased by approximately ($1,493,925.00). This was due to funding/budget cuts prevalent throughout the State.
Statement of Cash Flows
The final statement presented by the Georgia Perimeter College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with
Annual Financial Report FY 2003 (Version 1.0) 5

operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Year Ended June 30, 2003, Condensed

C ash Provided (used) By: Operating A ctivities Non-capital Financing Activities Investing Activities C apital and Related Financing A ctivities
Net C hange in C ash C ash, Beginning of Year
C ash, End of Year

June 30, 2003
($ 4 8 ,5 1 8 ,4 4 8 .7 8 ) 4 7 ,2 6 3 ,4 3 7 .2 5 3 ,5 1 6 ,2 7 8 .2 9 (4 ,4 5 9 ,2 7 2 .1 7 )
(2 ,1 9 8 ,0 0 5 .4 1 ) 1 2 ,6 1 6 ,8 3 8 .0 3
$ 1 0 ,4 1 8 ,8 3 2 .6 2

Capital Assets
The College had one significant capital asset addition for facilities in fiscal year 2003. The Signature Building on the Lawrenceville campus was completed and put in service in August 2003. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Economic Outlook
The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is strong. Even with a relatively flat funded year, the College was able to generate a modest increase in Net Assets. The College anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues.

_______________________ Jacquelyn M. Belcher, President Georgia Perimeter College
Annual Financial Report FY 2003 (Version 1.0) 6

Statement of Net Assets

GEORGIA PERIMETER C OLLEGE STATEMENT OF NET ASSETS June 30, 2003
ASSETS Current Assets C ash and C ash Equivalents S hort-term Investm ents A ccounts Receivable, net I n v e n to r ie s Othe r A ssets Total C urrent A ssets

June 30, 2003
$10,368,681.81
5,331,528.99 153,453.52 795,053.24
16,648,717.56

Noncurrent Assets Noncurrent C ash Investm ents Notes Receivable, net C apital A ssets, net Total Noncurrent A ssets TOTAL ASSETS

50,150.81
7,660.97 113,018,543.29 113,076,355.07 129,725,072.63

LIA BILIT IE S Current Liabilities
A ccounts Payable and A ccrued Liabilities D eposits Deferred Revenue Othe r Liabilities D eposits Held for Othe r Organizations C om pensated A bsences (current portion)
Total C urrent Liabilities Noncurrent Liabilities
C om pensated A bsences Long-term Liabilities
Total Noncurrent Liabilities TOTAL LIABILITIES

1,348,016.52
6,696,263.26 1,182,330.21 1,040,004.96 1,772,166.65 12,038,781.60
460,065.83 16,284,946.08 16,745,011.91 28,783,793.51

NET ASSETS Invested in C apital A ssets, net of related debt Restricted for No ne x p e nd a b le Ex p e nd a b le C apital Projects U n r e s tr ic te d TOTAL NET ASSETS

96,016,750.81
50,150.81 129,509.27 1,000,215.54 3,744,652.69 $100,941,279.12

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Statement of Revenues, Expenses and Changes in Net Assets

GEORGIA PERIMETER C OLLEGE STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS
for the Y ear Ended June 30, 2003
June 30, 2003

RE VE NU E S

O pe rating R e v e nue s

S tude nt Tuition a nd Fe e s

$30,246,151.01

Less: Sponsored and Unsponsored Scholarships

(4,521,451.27)

Federal A ppropriations

Federal G rants and C ontracts

14,316,737.68

S tate and Local G rants and C ontracts

484,616.40

Nongov e rnm e ntal G rants and C ontracts S ale s and S e rv ice s of Educational D e partm e nts

126,153.05 1,629,551.41

A uxiliary Enterprise s

2,285,967.15

Other O perating Revenue s

1,369,050.83

Total Operating Revenues

45,936,776.26

E XPE NS E S

O pe rating Ex pe nse s

S a la rie s :

Fa c u lty S taff

24,099,265.43 27,047,446.75

B enefits Other Personal S ervices

11,930,110.42

Travel

611,171.34

Scholarships and Fellowships

9,091,155.22

U tilitie s

3,181,597.57

S upplie s and O the r S e rv ice s D e pre ciation

17,014,923.48 4,474,051.86

Total O pe rating Ex pe nse s

97,449,722.07

O pe rating Incom e (loss) NONOPERA T ING REVE NUES (EXPENSES)

(51,512,945.81)

S tate A ppropriations

47,783,503.00

G ifts

Inv e stm e nt Incom e (e ndowm e nts, aux iliary and othe r) Inte re st Ex pe nse (capital asse ts)

76,778.13 (851,253.25)

Other Nonoperating Revenues

(180,818.92)

Ne t Nonope rating R e v e nue s

46,828,208.96

Incom e before other revenues, expenses, gains, or loss

(4,684,736.85)

S tate C apital A ppropriations C apital G rants and G ifts Federal G rants & C ontracts

19,727,623.33

S tate G rants & C ontracts

O the r G rants and C ontracts

Total Other Revenues

19,727,623.33

Increase in Net A ssets NET ASSETS

15,042,886.48

Ne t A sse ts-be ginning of y e ar, as originally re porte d

83,625,287.40

C um ulativ e e ffe ct of change s in accounting principle

Prior Year A djustm ents

2,273,105.24

Ne t A sse ts-be ginning of y e ar, re state d

85,898,392.64

Ne t A sse ts-End of Ye ar

$100,941,279.12

Annual Financial Report FY 2003 (Version 1.0) 8

Statement of Cash Flows
GEORGIA PERIMETER C OLLEGE STATEMENT OF C ASH FLOWS For the Year Ended June 30, 2003
CASH F LOWS F ROM OPE RATING A CTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales and Services of Educational D epartments Paym ents to Suppliers Paym ents to Em ployees Paym ents for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Em ployees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities
CASH F LOWS F ROM NON- CAPITA L F INANCING ACTIVIT IE S State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing A ctivities
CASH F LOWS F ROM CAPIT AL AND RELATED F INA NCING A CTIVITIES C apital Grants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities
CASH F LOWS F ROM INVESTING ACT IVITIES Proceeds from Sales and Maturities of Investments Interest on Investm ents Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003
$30,571,503.76
15,560,333.65 1,629,551.41
(35,630,294.54) (51,197,268.64) (13,612,606.49)
(36,118.95) 43,568.97
1,776,703.61 4,692.01
1,190,290.36 339,548.19 841,647.88
(48,518,448.78)
47,783,503.00 (540,539.43) 20,473.68
47,263,437.25
(3,139,339.75) (468,679.17) (851,253.25)
(4,459,272.17)
3,500,000.00 76,778.13 (60,499.84)
3,516,278.29 (2,198,005.41) 12,616,838.03 $10,418,832.62

Annual Financial Report FY 2003 (Version 1.0) 9

Statement of Cash Flows, Continued
RECONCILIATION OF OPERA TING LOSS TO NET CASH PROVIDE D (USED) BY OPERATING A CTIVITIES:
Operating Incom e (loss) A djustments to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating Activities
D epreciation C hange in Assets and Liabilities:
Receivables, net I n v e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($51,512,945.81)
4,474,051.86
518,673.28 28,237.78
(3,496,568.56) (17,197.48) 796,563.82 449,404.18 241,332.15
($48,518,448.78)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current A ssets

$10,368,681.81 50,150.81
$10,418,832.62

Georgia Perimeter College had no transactions to report under Non-Cash Investing, Non-Capital Financing, and Capital and Related-Financing Transactions.

Annual Financial Report FY 2003 (Version 1.0) 10

GEORGIA PERIMETER COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations Georgia Perimeter College serves the state, and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity Georgia Perimeter College is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Georgia Perimeter College as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Georgia Perimeter College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Georgia Perimeter College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the College is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of
Annual Financial Report FY 2003 (Version 1.0) 11

materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
Basis of Accounting For financial reporting purposes, the College is considered a special-purpose government engaged only in business-type activities. Accordingly, the College's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-college transactions have been eliminated.
The College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The College accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Consumable supplies are carried at the lower of cost or market on either the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis.
Annual Financial Report FY 2003 (Version 1.0) 12

Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the College's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Georgia Perimeter College when complete. For the year ended June 30, 2003, GSFIC transferred capital additions valued at $19,727,623.33 to Georgia Perimeter College.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a College residence hall.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net
Annual Financial Report FY 2003 (Version 1.0) 13

Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Georgia Perimeter College had accrued liability for compensated absences in the amount of $2,143,204.21 as of 7-1-2002. For FY2003, $1,772,166.65 was earned in compensated absences and employees were paid $1,683,138.38, for a net increase of $89,028.27. The ending balance as of 6-30-2003 in accrued liability for compensated absences is $2,232,232.48.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The College's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and
Annual Financial Report FY 2003 (Version 1.0) 14

Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.

Unrestricted Net Assets includes the following items which are quasi-restricted by management.
June 30, 2003

R & R Reserve Reserve for Encumbrances Reserve for Inventory O ther Unrestricted Total Unre stricted Net A ssets

$8,416.48 2,531,163.53
208,175.00 996,897.68 $3,744,652.69

When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.

Income Taxes Georgia Perimeter College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.

Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:

Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.

Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.

Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the College, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for sponsored and unsponsored scholarships.

Annual Financial Report FY 2003 (Version 1.0) 15

Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus Georgia Perimeter College) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus Georgia Perimeter College), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Annual Financial Report FY 2003 (Version 1.0) 16

Categorization of Deposits
The College's cash deposits are categorized by risk as follows:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the College or by its agent in the College's name.
Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the College's name.
Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the College's name, and amounts uncollateralized.
Cash Deposits as of June 30, 2003

Cash Deposits Investment Portfolio Accounts
Total Cash Deposits

C arrying Amount
$7,729,830.86

Bank Balances
$8,319,619.24

Risk Categories

1

2

$100,000.00 $8,219,619.24

$7,729,830.86 $8,319,619.24 $100,000.00 $8,219,619.24

3 $0.00
$0.00

Categorization of Investments
The College's investments are categorized as to credit risk within the three categories described below:
Category 1 - Insured or registered, or securities held by the College or its agent in the College's name
Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the College's name.
Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the College's name.

Annual Financial Report FY 2003 (Version 1.0) 17

At June 30, 2003, the College's investments consisted of the following:

Type of Investm ents
C om m on S tock C orporate B onds S ecurities and C orporate O bligations

Risk C ategories

1

2

$0.00

$0.00

3 $0.00

T o ta ls

$0.00

$0.00

$0.00

C arrying Amount
$0.00
$0.00

Investm ents Not S ubject to C ategorizations: B oard of Regents
S hort-Term Fund Balanced Income Fund Total Return Fund Investm ent Portfolio A ccounts Mutual Funds R eal Estate S tate Inve stm ent Pool S hort-Term Investm ents
Total Investm ents

2,620,970.13 $2,620,970.13

Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the College did not own any specific, identifiable investment securities of the pool.

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2003.

S tude nt Tuition and Fees A uxiliary Ente rprise s and Other O perating A ctivities Federal, S tate, and Private Funds O ther
Less A llowance for D oubtful A ccounts
Net A ccounts Receivable

June 30, 2003
$741,372.55 445,848.50
4,114,683.48 261,249.89
5,563,154.42 231,625.43
$5,331,528.99

Annual Financial Report FY 2003 (Version 1.0) 18

Note 4. Inventories Inventories consisted of the following at June 30, 2003.

B o o k s to r e Food S ervices Physical Plant O th e r
T o ta l

June 30, 2003 $0.00
153,453.52 $153,453.52

Note 5. Notes/Loans Receivable Georgia Perimeter College had no notes or loans receivable as of June 30, 2003.

Annual Financial Report FY 2003 (Version 1.0) 19

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2003.

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$4,220,775.73 1,516,255.99 5,737,031.72

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

87,632,701.73 3,814,170.00 9,431,053.01
15,602,864.32 10,739,032.06
127,219,821.12

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

24,518,007.89 2,287,889.47 6,275,795.21 151,694.51 9,100,984.00
42,334,371.08

Total Capital Assets, Being Depreciated, Net 84,885,450.04

Capital Assets, net

$90,622,481.76

Additions
$0.00 44,566.95 44,566.95

Reductions
$0.00 74,954.97 74,954.97

Ending Balance 6/30/2003
$4,220,775.73 1,485,867.97 5,706,643.70

20,338,736.94
4,866,472.05 1,676,939.75
783,005.50
27,665,154.24

3,726,594.08 111,982.00
3,838,576.08

0.00 107,971,438.67
3,814,170.00 10,570,930.98 17,279,804.07 11,410,055.56
0.00 151,046,399.28

2,778,860.45 128,425.83
3,487,287.72 262,436.54 511,368.00
7,168,378.54
20,496,775.70
$20,541,342.65

2,729,686.83 242,156.53
2,684,424.57
111,982.00

0.00 24,567,181.51
2,174,158.77 7,078,658.36
414,131.05 9,500,370.00

5,768,249.93

43,734,499.69

(1,929,673.85) 107,311,899.59

($1,854,718.88) $113,018,543.29

Annual Financial Report FY 2003 (Version 1.0) 20

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2003.
June 30, 2003

Prepaid Tuition and Fees Research O the r D eferred Revenue

$6,262,263.72 433,999.54

T o ta ls

$6,696,263.26

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2003 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2002

Additions

$15,388,188.51 $1,676,939.75

Reductions

Ending Balance June 30, 2003

$351,966.40 $16,713,161.86

Current Portion
$428,215.78

Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total

1,990,900.33 1,924,470.53 1,990,900.33 1,924,470.53

1,683,138.38 1,683,138.38

2,232,232.48 2,232,232.48

1,772,166.65 1,772,166.65

Total Long Term Obligations

$17,379,088.84 $3,601,410.28 $2,035,104.78 $18,945,394.34 $2,200,382.43

(a) The beginning balance includes the amount shown as current in FY2002 and reclassified as long-term in FY2003.

Annual Financial Report FY 2003 (Version 1.0) 21

Note 9. Lease Obligations
Georgia Perimeter College is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property.
Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2003, were as follows:

Year Ending June 30:

Year

2004

1

2005

2

2006

3

2007

4

2008

5

2009 through 2013

6-10

2014 through 2018

11-15

2019 through 2023

16-20

2024 through 2028

21-25

2028 through 2032

26-30

2033 through 2037

31-35

2038 through 2042

36-40

Total m inim um lease paym ents

Less: Interest

Less: Executory costs (if paid)

Principal O utstanding

Real Property

C apital Leases

Operating Leases

$1,269,804.00 1,257,304.00 1,254,804.00 1,354,804.00 1,374,804.00 7,094,020.00 6,760,668.00 6,270,800.00 127,909.06

$0.00

26,764,917.06 10,051,755.20
$16,713,161.86

$0.00

CAPITAL LEASES
Georgia Perimeter College has one capital lease payable in monthly installments with the term expiring in 2023. Expenditures for fiscal year 2003 were $1,194,636.00 of which $842,669.60 represented interest expense. Principal paid on the capital lease was $ 351,966.40 for the fiscal year ended June 30, 2003. The following is a summary of the carrying value of the asset held under the capital lese at June 30, 2003:

Buildings Totals

$16,713,161.86 $16,713,161.86

Annual Financial Report FY 2003 (Version 1.0) 22

Note 10. Retirement Plans

Teachers Retirement System Of Georgia

Plan Description Georgia Perimeter College participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Georgia Perimeter College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Georgia Perimeter College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$2,601,856.37 $2,420,304.85 $3,017,446.02

Regents Retirement Plan

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.

Funding Policy Georgia Perimeter College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statue and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation. Employees

Annual Financial Report FY 2003 (Version 1.0) 23

contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.
Georgia Perimeter College and the covered employees made the required contributions of $1,215,716.14 (10.02%) and $606,454.05 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description Georgia Perimeter College participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $614,133.11 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
Georgia Perimeter College is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Georgia Perimeter College and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue
Annual Financial Report FY 2003 (Version 1.0) 24

Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Georgia Perimeter College, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Georgia Perimeter College expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Georgia Perimeter College (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
Note 13. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University
Annual Financial Report FY 2003 (Version 1.0) 25

System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 214 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, Georgia Perimeter College recognized as incurred $777,172.32 of expenditures, which was net of $251,020.78 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 26

Note 14. Natural Classifications With Functional Classifications The College's operating expenses by functional classification for FY2003 are shown below:

St at ement of Operat ing Expenses - Nat ural vs Func t ional Classific at ions For t he Fisc al Y ear Ended June 30, 2003
Func t ional Classific at ion FY 2003

Natural C lassification

I n s tr u c tio n

Research

Public S e r v ic e

A c a d e m ic Support

F ac ult y Staff B enefits P erso nal Services T rav el Sc ho larships and F ello ws hips Ut ilit ies Supplies and Others Services Depreciatio n

$ 24,063,444.62 4,418,713.54 5,350,692.68
189,931.68 (4,452,250.21)
405,899.39 5,925,645.81
341,652.47

$ 0.00

$ 0.00 5,678.83 14,101.73
732.96 2,979.65

$ 23,166.93 5,268,125.44 1,059,536.41
61,613.58 250.00
184,582.44 801,232.89 603,362.29

T o tal Expenses

$ 36,243,729.98

$ 0.00

$ 23,493.17

$ 8,001,869.98

S tu d e n t S e r v ic e s
$ 1,428.60 5,276,187.79
1,131,115.95
109,450.89 140,787.33 108,471.99 1,708,867.89
4,961.23
$ 8,481,271.67

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003

Natural Classification

Instit ut io nal Suppo rt

P lant Operatio ns & M aintenance

Functional Classification FY2003

Scho larships & Fellowships

Auxiliary Enterprises

Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciatio n

$ 11,225.28 7,835,910.18 3,282,673.93
111,097.54
355,716.53 3,279,118.35
15,665.86

$ 0.00 3,808,508.77 1,021,442.39
(80,956.24) 11,255.29
2,108,529.05 4,673,652.08
34,993.06

$ 0.00 13,138,975.33

$ 0.00 434,322.20
70,547.33 80,956.24 127,822.36 263,392.77 17,665.21 623,426.81
7,804.18

Total Expenses

$ 14,891,407.67

$ 11,577,424.40

$ 13,138,975.33

$ 1,625,937.10

Unallo cat ed Expenses $ 0.00
3,465,612.77 $ 3,465,612.77

To tal Expenses
$ 24,099,265.43 27,047,446.75 11,930,110.42 0.00 611,171.34 9,091,155.22 3,181,597.57 17,014,923.48 4,474,051.86
$ 97,449,722.07

Annual Financial Report FY 2003 (Version 1.0) 27

GEORGIA STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2003

Carl V. Patton President

Georgia State University Atlanta, Georgia
Jerry J. Rackliffe Interim Vice President for Finance and Administration

GEORGIA STATE UNIVERSITY ANNUAL FINANCIAL REPORT
FY 2003
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 8 Statement of Revenues, Expenses and Changes in Net Assets............................................ 9 Statement of Cash Flows ................................................................................................... 10 Note 1 Summary of Significant Accounting Policies ...................................................... 12 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 18 Note 3 Accounts Receivable............................................................................................. 21 Note 4 Inventories............................................................................................................. 21 Note 5 Notes/Loans Receivable........................................................................................ 21 Note 6 Capital Assets........................................................................................................ 22 Note 7 Deferred Revenue.................................................................................................. 23 Note 8 Long-Term Liabilities ........................................................................................... 23 Note 9 Lease Obligations.................................................................................................. 24 Note 10 Retirement Plans ................................................................................................. 25 Note 11 Risk Management................................................................................................ 27 Note 12 Contingencies...................................................................................................... 28 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 28 Note 14 Natural Classifications With Functional Classifications..................................... 29

GEORGIA STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Georgia State University is one of the 34 institutions of the University System of Georgia. The University, located in Atlanta, Georgia, was founded in 1913. The University offers baccalaureate, masters and doctoral degrees in a wide variety of subjects. This wide range of educational opportunities attracts a highly qualified faculty and a student body of more than 27,000 students. Georgia State University employs approximately 1,700 faculty and 2,000 staff. The institution continues to grow as shown by the comparison numbers that follow.

Faculty

Students

FY2003 FY2002 FY2001

1,740 1,583 1,556

27,502 25,745 23,619

Overview of the Financial Statements and Financial Analysis

Georgia State University is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and the Statement of Cash Flows. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Georgia State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements.

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major
Annual Financial Report FY 2003 (Version 1.0) 1

categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

Assets: Current Assets Capital Assets, net Other Assets Total Assets

June 30, 2003
$102,356,042.45 293,822,045.81 5,826,290.92 402,004,379.18

June 30, 2002
$110,445,178.84 257,922,346.31 5,452,950.39 373,820,475.54

Liabilities: Current Liabilities Noncurrent Liabilities Total Liabilities

39,012,058.16 47,684,486.04 86,696,544.20

45,101,468.30 49,171,677.76 94,273,146.06

Net Assets: Invested in C apital Assets, net of debt Restricted - nonexpendable Restricted - expendable Capital Projects Unrestricted Total Net Assets

247,186,520.64 43,665.29
15,330,560.89 1,128,046.00
51,619,042.16 $315,307,834.98

210,227,466.03 44,862.40
15,373,915.70 477,505.25
53,423,580.10 $279,547,329.48

The total assets of the institution increased by $28,183,903.64 primarily due to the completion of the Helen M. Aderhold Learning Center. Current Assets showed a significant decrease during the year. The decrease in Current Assets is primarily due to the timing of vendor payments and is reflected in an accompanying decrease in Current Liabilities.
The total liabilities for the year decreased by ($7,576,601.86). The primary cause for the decrease was in Current Liabilities, primarily ($9,918,014.36) in accounts payable and accrued liabilities. The combination of the increase in total assets of $28,183,903.64 and the decrease in total liabilities of ($7,576,601.86) yields an increase in total net assets of $35,760,505.50. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $36,959,054.61.
The unrestricted net asset balance of $51,619,042.16 is allocated to Reserve for Encumbrances in the amount of $21,406,488.58, Reserve for Renewals and Replacements in the amount of
Annual Financial Report FY 2003 (Version 1.0) 2

$7,955,453.76, and the remaining balance is primarily allocated to Auxiliary Enterprises and Student Activities.

Statement of Revenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking, operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30, 2003

June 30, 2002

Operating Revenues Operating Expenses Operating Loss

$210,624,429.54 386,672,095.45 (176,047,665.91)

$186,691,097.79 376,215,765.00 (189,524,667.21)

Nonoperating Revenues and Expenses

169,354,823.77

182,980,593.39

Income (Loss) Before other revenues, expenses, gains or losses

(6,692,842.14)

(6,544,073.82)

Other revenues, expenses, gains or losses

32,330,007.45

8,183,961.45

Increase in Net Assets

25,637,165.31

1,639,887.63

Net Assets at beginning of year, as originally reported C umulative effect of changes in accounting principle Prior Year Adjustments Net Assets at beginning of year, restated

279,547,329.48
10,123,340.19 289,670,669.67

544,921,432.95 267,236,194.98
277,685,237.97

Net Assets at End of Year

$315,307,834.98

$279,547,329.48

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:
Annual Financial Report FY 2003 (Version 1.0) 3

Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

Operating Revenue Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Auxiliary Other
Total Operating Revenue
Nonoperating Revenue State Appropriations Gifts Investment Income Grants and Contracts Other
Total Nonoperating Revenue
Capital Gifts and Grants State Capital Appropriations Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

June 30, 2003
$99,170,264.52 77,684,247.15 2,667,383.15 23,436,266.34 7,666,268.38
210,624,429.54
172,115,802.34 17,784.94
1,411,042.79 5,853,065.40 (1,465,809.66)
177,931,885.81
26,380,740.39 96,201.66
26,476,942.05
$415,033,257.40

June 30, 2002
$86,535,715.03 66,337,716.45 3,392,888.44 21,684,591.05 8,740,186.82
186,691,097.79
184,018,543.85 2,222,788.62 7,733,081.94 (650,127.85)
193,324,286.56
450,879.51 450,879.51 $380,466,263.86

Annual Financial Report FY 2003 (Version 1.0) 4

Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003
$128,507,015.46 54,014,960.91 22,060,633.64 37,278,680.35 21,281,253.47 55,068,827.35 26,266,382.84 23,811,256.35 18,383,085.08
386,672,095.45
2,723,996.64
$389,396,092.09

June 30, 2002
$124,061,668.76 50,526,955.55 17,433,283.98 34,824,284.87 21,861,063.02 60,893,448.38 29,368,331.34 20,073,545.37 17,302,132.81
376,344,714.08
2,610,611.23
$378,955,325.31

Revenues associated with student tuition and fees, net of sponsored and unsponsored scholarships, increased approximately $12,634,549.49 during the year. This increase reflects an increase in both tuition and fees and the number of students enrolled in the University. Grants and Contracts increased in the amount of approximately $11,346,550.70, primarily Federal Grants and Contracts.
The compensation and employee benefits category increased by approximately $13,775,554.13. The increase reflects a pay raise for the employees of the institution of approximately three percent with the associated fringe benefits. The increase also reflects an increased cost of health insurance for the employees of the institution.
Utilities increased by approximately $693,881.53 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2003.
Under non-operating revenues (expenses) state appropriations decreased by approximately ($11,902,741.51). State Capital appropriations increased by $26,380,740.39, which was the result of the transfer of title from the Georgia State Financing and Investment Commission (GSFIC) for the Helen M. Aderhold Learning Center.

Annual Financial Report FY 2003 (Version 1.0) 5

Statement of Cash Flows
The final statement presented by Georgia State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Years Ended June 30, 2003 and 2002, Condensed

Cash Provided (used) By: Operating Activities Non-capital Financing Activities Investing Activities Capital and Related Financing Activities

June 30, 2003

June 30, 2002

($166,029,145.21) 178,105,323.98 1,409,780.46 (23,145,677.74)

($164,637,088.44) 191,824,682.71 8,000,112.63 (22,014,534.01)

Net Change in Cash Cash, Beginning of Year

(9,659,718.51) 88,206,944.97

13,173,172.89 75,033,772.08

Cash, End of Year

$78,547,226.46

$88,206,944.97

Capital Assets
In August 2002, Georgia State University opened the new Helen M. Aderhold Learning Center. This facility was financed through a combination of state and private funding. The Learning Center consists of 46 classrooms, three large lecture halls, and a computer laboratory. This addition added approximately 159,700 gross square feet of floor area to the Georgia State University campus.
In August 2002, University Lofts, a 405 bed housing facility, opened on land adjacent to the University campus. The Lofts was constructed by a private developer and is managed by the University to provide housing for graduate, married, and international students. Since the University does not own or lease the facility, neither the building nor the operating activities are reflected on the University's financial statements.
In terms of future projects, the University's top capital priority is the Science Teaching Laboratory Building. The Board of Regents, in Spring 2000, added our proposal for the 202,000
Annual Financial Report FY 2003 (Version 1.0) 6

gross square foot building to its Major Capital Funding List. Of the total $71.35 million estimated to construct the building, the University has requested state funding of $46.35 million and the remainder is to be funded through non-state sources. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Economic Outlook The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University has been impacted by state mandated reductions in appropriations due to the current economic situation. However, strong fiscal management combined with growth in enrollment and sponsored research programs have enabled the University to continue to grow within this challenging environment. The overall financial position of the University is strong. The University anticipates the current fiscal year will be much like the last and will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues.
_____________________ Carl V. Patton, President Georgia State University
Annual Financial Report FY 2003 (Version 1.0) 7

Statement of Net Assets
GE O RGIA S TA TE UNIV E RS ITY STATEM ENT O F NET ASSETS June 30, 2003
ASSETS Curre nt A sse ts C a sh a nd C a sh Equiv a le nts S ho rt-te rm Inv e stm e nts A cco unts R e ce iv a ble , ne t Inv e nto rie s O the r A sse ts T o ta l C urre nt A sse ts
Noncurre nt Asse ts Noncurrent C ash Inv e stm e nts No te s R e ce iv a ble , ne t C a pita l A sse ts, ne t T o ta l No ncurre nt A sse ts TOTAL ASSETS
LIA BILIT IE S Curre nt Lia bilitie s A cco unts P a y a ble a nd A ccrue d Lia bilitie s D e po sits D eferred Revenue O the r Lia bilitie s D e po sits He ld fo r O the r O rga niza tio ns C o m pe nsa te d A bse nce s (curre nt po rtio n) T o ta l C urre nt Lia bilitie s Noncurre nt Lia bilitie s C o m pe nsa te d A bse nce s Lo ng-te rm Lia bilitie s T o ta l No ncurre nt Lia bilitie s TOTAL LIABILITIES

June 30, 2003
$78,547,226.46
20,525,473.37 108,931.27
3,174,411.35 102,356,042.45
45,565.83 5,780,725.09 293,822,045.81 299,648,336.73 402,004,379.18
7,757,132.06 324,396.08
21,807,338.56 1,637,454.49 799,905.69 6,685,831.28
39,012,058.16
3,023,779.86 44,660,706.18 47,684,486.04 86,696,544.20

NET ASSETS Inv e ste d in C a pita l A sse ts, ne t o f re la te d de bt R e stricte d fo r None x penda ble Ex pe nda ble C a pita l P ro je cts Unre stricte d TOTAL NET ASSETS

247,186,520.64
43,665.29 15,330,560.89
1,128,046.00 51,619,042.16 $315,307,834.98

Annual Financial Report FY 2003 (Version 1.0) 8

Statement of Revenues, Expenses and Changes in Net Assets

GEORGIA STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2003
June 30, 2003

REVENUES

Operating Revenues

Student Tuition and Fees

$118,631,726.08

Less: Sponsored and Unsponsored Scholarships

(19,461,461.56)

Federal Appropriations

Federal Grants and Contracts State and Local Grants and Contracts

51,326,439.35 8,133,592.77

Nongovernmental Grants and Contracts

18,224,215.03

Sales and Services of Educational Departments

2,667,383.15

Auxiliary Enterprises

23,436,266.34

Other Operating Revenues

7,666,268.38

Total Operating Revenues

210,624,429.54

EXPENSES

Operating Expenses

Salaries:

Faculty Staff

72,855,512.77 121,527,608.18

Benefits Other Personal Services

44,606,994.24 7,740,836.32

Travel

3,852,651.42

Scholarships and Fellowships

23,811,256.35

Utilities

8,837,873.59

Supplies and Other Services Depreciation

84,842,263.51 18,597,099.07

Total Operating Expenses

386,672,095.45

Operating Income (loss) NONOPERATING REVENUES (EXPENSES)

(176,047,665.91)

State Appropriations

172,115,802.34

Gifts

17,784.94

Investment Income (endowments, auxiliary and other) Interest Expense (capital assets)

1,411,042.79 (2,723,996.64)

Other Nonoperating Revenues

(1,465,809.66)

Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss

169,354,823.77 (6,692,842.14)

State Capital Appropriations

26,380,740.39

Capital Grants and Gifts

96,201.66

Federal Grants & Contracts

State Grants & Contracts

200,168.80

Other Grants and Contracts

5,652,896.60

Total Other Revenues

32,330,007.45

Increase in Net Assets NET ASSETS

25,637,165.31

Net Assets-beginning of year, as originally reported

279,547,329.48

Cumulative effect of changes in accounting principle

Prior Year Adjustments

10,123,340.19

Net Assets-beginning of year, restated

289,670,669.67

Net Assets-End of Year

$315,307,834.98

Annual Financial Report FY 2003 (Version 1.0) 9

Statement of Cash Flows
GEORGIA STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2003
CASH F LOWS F ROM OPERATING ACTIVIT IE S Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales & Services of Educational D epartm ents Paym ents to Suppliers Paym ents to Em ployees Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls B ookstore Food Services P a r k in g /T r a n s p o r ta tio n Health S ervices Intercollegiate Athletics Other Organizations Other Receipts (paym ents) Net C ash Provided (used) by Operating Activities
CASH F LOWS F ROM NON- CAPITAL F INANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities
CASH F LOWS F ROM CA PITAL AND RELATED F INANCING ACT IVITIES C apital Grants and Gifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities
CASH F LOWS F ROM INVESTING A CTIVITIES Proceeds from Sales and Maturities of Investm ents Interest on Investm ents Purchase of Investm ents Net C ash Provided (used) by Investing A ctivities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003
$92,870,366.87
78,490,173.14 7,057,397.51
(159,094,199.95) (194,380,931.44)
(19,887,093.51) (3,250,806.95) 2,876,204.09
10,262,937.94 744,931.49 188,903.48
4,623,413.36
4,939,349.83 2,718,058.23 5,812,150.70 (166,029,145.21)
171,615,802.34 636,456.24
5,853,065.40 178,105,323.98
44,500.54 (19,032,566.83)
(1,433,614.81) (2,723,996.64) (23,145,677.74)
(1,262.33) 1,411,042.79
1,409,780.46 (9,659,718.51) 88,206,944.97 $78,547,226.46

Annual Financial Report FY 2003 (Version 1.0) 10

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating Activities
Depreciation Dept of Admin Services in-kind C hange in Assets and Liabilities:
Receivables, net Inventories Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($176,047,665.91)
18,597,099.07 500,000.00
(2,378,547.10) (12,363.85)
(180,803.63) (10,492,081.97)
2,815,063.32 623,387.12 546,767.74
($166,029,145.21)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current Assets

$78,547,226.46 $78,547,226.46

** NON-C ASH INVESTING, NON-C APITAL FINANC ING, AND C APITAL AND RELATED FINANC ING TRANSAC TIONS

Fixed assets acquired by incurring capital lease obligations C hange in fair value of investments recognized as a component of interest i

$331,203.32 $1,197.11

Annual Financial Report FY 2003 (Version 1.0) 11

GEORGIA STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations Georgia State University serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity Georgia State University is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Georgia State University as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Georgia State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Georgia State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Annual Financial Report FY 2003 (Version 1.0) 12

Generally Accepted Accounting Principles (GAAP) require that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominant activity takes place.
Basis of Accounting For financial reporting purposes, the University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-university transactions have been eliminated.
The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Annual Financial Report FY 2003 (Version 1.0) 13

Inventories Consumable supplies are carried at cost. Resale Inventories are valued at cost using the first-in, first-out ("FIFO") basis.
Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000.00 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
At the end of fiscal year 2002 a determination was made that a 10% residual value would be considered in the depreciation for buildings, building improvements, facilities and other structures, and infrastructure. For fiscal year 2003 financial statement presentation, $10,123,340.19 was reported in the Statement of Revenues, Expenses, and Changes in Net Assets as a prior year adjustment.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Georgia State University when complete. For the year ended June 30, 2003, GSFIC transferred capital additions valued at $26,380,740.39 to Georgia State University. The balance of construction in progress retained by GSFIC totaled $4,041,789.87 at June 30, 2003.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred
Annual Financial Report FY 2003 (Version 1.0) 14

revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Georgia State University had accrued liability for compensated absences in the amount of $9,162,843.40 as of 7-1-2002. For FY2003, $7,359,376.08 was earned in compensated absences and employees were paid $6,812,608.34, for a net increase of $546,767.74. The ending balance as of 6-30-2003 in accrued liability for compensated absences is $9,709,611.14.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The University's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary
Annual Financial Report FY 2003 (Version 1.0) 15

enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

Renewal & Replacement Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted Total Unrestricted Net Assets

June 30, 2003
$7,955,453.76 21,406,488.58
99,109.52 22,157,990.30 $51,619,042.16

When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes Georgia State University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues The University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, (3) most Federal, state and local grants and contracts, and (4) interest on institutional student loans.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, and
Annual Financial Report FY 2003 (Version 1.0) 16

the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships.
Annual Financial Report FY 2003 (Version 1.0) 17

Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus Georgia State University) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-1759:
1. Bonds, bills, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus Georgia State University), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Categorization of Deposits
The University's cash deposits are categorized by risk as follows:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the University or by its agent in the University's name.
Annual Financial Report FY 2003 (Version 1.0) 18

Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University's name.
Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the University's name, and amounts uncollateralized.
Cash Deposits as of June 30, 2003

Cash Deposits Investment Portfolio Accounts
Total Cash Deposits

Carrying Amount
$21,937,784.86
$21,937,784.86

Bank Balances
$28,363,982.96 0.00
$28,363,982.96

Risk Categories

1

2

3

$204,919.67

$0.00 $28,159,063.29

$204,919.67

$0.00 $28,159,063.29

Categorization of Investments
The University's investments are categorized as to credit risk within the three categories described below:
Category 1 - Insured or registered, or securities held by the University or its agent in the University's name
Category 2 - Uninsured and unregistered, with securities held by the counterparty's trust department or agent in the University's name.
Category 3 - Uninsured and unregistered, with securities held by the counterparty, or by its trust department or agent, but not in the University's name.

Annual Financial Report FY 2003 (Version 1.0) 19

At June 30, 2003, the University's investments consisted of the following:

Type of Investm e nts
C om m on S tock C orporate Bonds S ecurities and C orporate O bligations

Risk C ategories

1

2

$0.00

$0.00

3 $0.00

C arrying Amount
$0.00 0.00 0.00

T o ta ls

$0.00

$0.00

$0.00

$0.00

Investm e nts Not S ubject to C ategorizations: B oard of R egents
S hort-Term Fund Balanced Income Fund Total Return Fund Investm e nt Portfolio A ccounts Mutual Funds R eal Estate S tate Investm ent Pool S hort-Term Investm ents
Total Investm ents

$45,565.83
56,444,046.60 $56,489,612.43

Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool.

Annual Financial Report FY 2003 (Version 1.0) 20

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2003.

June 30, 2003

Student Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal, State, and Private Funds O th e r
Less Allowance for Doubtful Accounts

$6,232,680.08 1,015,598.08
12,627,718.24 1,680,625.40
21,556,621.80 1,031,148.43

Net Accounts Receivable

$20,525,473.37

Note 4. Inventories

Inventories consisted of the following at June 30, 2003.

June 30, 2003

B o o k sto re Fo o d S e rv ice s P hy sica l P la nt O the r
T o ta l

$ 0 .0 0
91,406.02 17,525.25 $ 1 0 8 ,9 3 1 .2 7

Note 5. Notes/Loans Receivable
Student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the notes/loans receivable at June 30, 2003 and 2002. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education.

Annual Financial Report FY 2003 (Version 1.0) 21

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2003.

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$21,361,853.59 4,674,389.39
26,036,242.98

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

2,515,865.03 288,140,848.76
1,198,766.00 51,097,510.19
429,569.74 71,826,370.42
0.00 415,208,930.14

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

512,671.13 100,098,366.97
622,363.78 30,918,970.92
92,420.75 51,078,033.26
0.00 183,322,826.81

Total Capital Assets, Being Depreciated, Net 231,886,103.33

Capital Assets, net

$257,922,346.31

Additions
$0.00 3,997,266.14 3,997,266.14

Reductions

Ending Balance 6/30/2003

$0.00 3,929,881.84 3,929,881.84

$21,361,853.59 4,741,773.69
26,103,627.28

29,164,031.45 273,706.12
8,475,515.97 310,897.61
6,392,231.16 10,892.60
44,627,274.91

3,030,656.12 207,535.02
3,238,191.14

2,515,865.03 317,304,880.21
1,472,472.12 56,542,370.04
740,467.35 78,011,066.56
10,892.60 456,598,013.91

114,366.25 8,319,894.13
60,925.63 5,917,076.92
77,689.65 4,107,146.49
18,597,099.07

51,267.11 10,009,836.70
62,236.38 2,709,455.29
207,535.02
13,040,330.50

575,770.27 98,408,424.40
621,053.03 34,126,592.55
170,110.40 54,977,644.73
0.00 188,879,595.38

26,030,175.84 (9,802,139.36) 267,718,418.53

$30,027,441.98 ($5,872,257.52) $293,822,045.81

Annual Financial Report FY 2003 (Version 1.0) 22

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2003.

P re p a id T uitio n a nd Fe e s Research O the r D e fe rre d R e v e nue
T o ta ls

June 30, 2003
$16,233,493.82 3,767,412.32 1,806,432.42
$21,807,338.56

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2003 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2002

Additions

Reductions

Ending Balance June 30, 2003

Current Portion

$47,339,535.22 $331,203.32 $1,433,614.75 $46,237,123.80 $1,576,417.62

Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total

9,162,843.40 7,359,376.08 9,162,843.40 7,359,376.08

6,812,608.34 6,812,608.34

9,709,611.14 0.00
9,709,611.14

6,685,831.28 6,685,831.28

Total Long Term Obligations

$56,502,378.62 $7,690,579.40 $8,246,223.09 $55,946,734.94 $8,262,248.90

(a) The beginning balance includes the amount shown as current in FY2002 and reclassified as long-term in FY2003.

Annual Financial Report FY 2003 (Version 1.0) 23

Note 9. Lease Obligations
Georgia State University is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property.
Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2003, were as follows:

Year Ending June 30:

Year

2004

1

2005

2

2006

3

2007

4

2008

5

2009 through 2013

6-10

2014 through 2018

11-15

2019 through 2023

16-20

2024 through 2028

21-25

2029 through 2033

26-30

2034 through 2038

31-35

2039 through 2043

36-40

Total m inim um lease paym ents

Less: Interest

Less: Executory costs (if paid)

Principal O utstanding

C apital Leases
$4,290,615.64 4,308,986.53 4,301,749.35 4,322,979.82 4,388,513.42
23,278,190.46 25,701,003.22 14,524,287.18

Operating Leases
$4,008,889.65 3,245,726.07 3,010,239.63 2,856,137.48 2,497,140.10 7,051,356.00

85,116,325.63 38,879,201.83
$46,237,123.80

$22,669,488.92

CAPITAL LEASES

Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2004 and 2021. Expenditures for fiscal year 2003 were $4,157,611.41 of which $2,723,996.66 represented interest. Total principal paid on capital leases was $1,433,614.75 for the fiscal year ended June 30, 2003.

Interest rates range from 3.30 percent to 7.75 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2003:

Equipment Buildings
Totals

$ 570,356.95 46,167,463.54
$46,737,820.49

Annual Financial Report FY 2003 (Version 1.0) 24

Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms.
Georgia State University has two capital leases associated with buildings. In July 2001, Georgia State University entered into a capital lease valued at $34,650,000.00 with an effective interest rate of 6.985 percent with the Georgia State University Foundation (GSUF), whereby the University leases the Student Recreation Center for a twenty-year period that began July 2001 and expires June 2021. In March 2000, the University entered into a capital lease valued at $14,038,328.00 with an effective interest rate of 6.985 percent with the GSUF whereby the University leases the Alpharetta Center for a twenty-year period that began March 2000 and expires February 2020. The outstanding principal liability at June 30, 2003 on these capital leases is $32,938,935.52 and $12,826,289.92 respectively. Each year, the monthly payments for both of these leases will increase by the greater of 2% or the CPI.
Georgia State University also has various capital leases for equipment with an outstanding balance at June 30, 2003 in the amount of $471,898.36
OPERATING LEASES
Georgia State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2004 through 2011. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers, other small business equipment and buildings.
Noncancellable operating lease expenditures for equipment in 2003 were $352,236.36 and for buildings were $3,275,017.00.
Note 10. Retirement Plans
Teachers Retirement System Of Georgia
Plan Description Georgia State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.
Annual Financial Report FY 2003 (Version 1.0) 25

Funding Policy Employees of Georgia State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Georgia State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$9,755,816.34 $9,475,967.86 $12,254,291.00

Regents Retirement Plan
Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assemble in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.
Funding Policy
Georgia State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.
Georgia State University and the covered employees made the required contributions of $6,660,350.87 (10.02%) and $3,323,536.30 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description Georgia State University participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal,
Annual Financial Report FY 2003 (Version 1.0) 26

and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $482,928.60 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
Georgia State University is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Georgia State University and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Georgia State University, as an organizational unit of the Board of Regents of the University System of
Annual Financial Report FY 2003 (Version 1.0) 27

Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Georgia State University expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Georgia State University (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
Note 13. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals.
As of June 30, 2003, there were 794 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, Georgia State University recognized as incurred $2,934,110.43 of expenditures, which was net of $1,214,225.52 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 28

Note 14. Natural Classifications With Functional Classifications The University's operating expenses by functional classification for FY2003 are shown below:

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003
Functional Classification FY2003

Natural Classification

Instruction

Research

Public Service

Academic Support

Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciatio n

$ 58,935,200.76 28,642,279.15 23,583,495.56 2,575,430.27 1,645,183.94
951,614.55 12,173,811.23

$ 12,406,012.69 21,081,293.69 4,076,265.81 4,001,142.32 1,013,444.58
280,689.78 11,156,112.04

$ 403,298.53 5,986,653.11 1,531,725.15
389,511.10 283,131.25
173,330.39 13,292,984.11

$ 987,134.79 21,638,055.90 5,230,490.25
213,548.53 363,981.15
602,202.59 8,243,267.14

Total Expenses

$ 128,507,015.46

$ 54,014,960.91

$ 22,060,633.64

$ 37,278,680.35

Student Services
$ 123,866.00 12,452,301.58 2,905,928.89
119,947.33 307,422.75
419,716.32 4,952,070.60
$ 21,281,253.47

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003

Natural Classification

Institutional Support

Plant Operations & Maintenance

Functional Classification FY2003

Scholarships & Fellowships

Auxiliary Enterprises

Unallocated Expenses

Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation

$0.00 19,510,335.97 6,086,632.24
250,095.33 208,061.95
452,021.13 12,151,736.98 16,409,943.75

$0.00 9,844,167.71 742,946.27
62,343.74 11,705.20
4,054,456.75 11,550,763.17

$0.00 23,811,256.35

$0.00 2,372,521.07
449,510.07 128,817.70 19,720.60
1,903,842.08 11,321,518.24 2,187,155.32

$0.00

Total Expenses

$55,068,827.35

$26,266,382.84

$23,811,256.35

$18,383,085.08

$0.00

Total Expenses
$72,855,512.77 121,527,608.18 44,606,994.24 7,740,836.32
3,852,651.42 23,811,256.35 8,837,873.59 84,842,263.51 18,597,099.07
$386,672,095.45

Annual Financial Report FY 2003 (Version 1.0) 29

GORDON COLLEGE
Financial Report
For the Year Ended June 30, 2003

Gordon College Barnesville, Georgia

Dr. Lawrence V. Weill
President

Jerry Turner
Vice President for Business and Finance

GORDON COLLEGE ANNUAL FINANCIAL REPORT
FY 2003
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 7 Statement of Revenues, Expenses and Changes in Net Assets............................................ 8 Statement of Cash Flows ..................................................................................................... 9 Note 1 Summary of Significant Accounting Policies ...................................................... 11 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 16 Note 3 Accounts Receivable............................................................................................. 18 Note 4 Inventories............................................................................................................. 19 Note 5 Notes/Loans Receivable...................................................................19 Note 6 Capital Assets.........................................................................................................20 Note 7 Deferred Revenue.................................................................................................21 Note 8 Long-Term Liabilities ...........................................................................................21 Note 9 Lease Obligations..................................................................................................21 Note 10 Retirement Plans ..................................................................................................22 Note 11 Risk Management ................................................................................................23 Note 12 Contingencies.......................................................................................................24 Note 13 Post-Employment Benefits Other Than Pension Benefits ..................................24 Note 14 Natural Classifications with Functional Classifications .....................................26

GORDON COLLEGE
Management's Discussion and Analysis

Introduction

Gordon College is one of the 34 institutions of the University System of Georgia. The College, located in Barnesville, Georgia, was founded in 1852 and has become known for its state-of-theart technology and technology-related programs. The College offers Associate degrees in a wide variety of subjects. This wide range of educational opportunities attracts a highly qualified faculty and a student body of more than 3,416 students each year. The institution continues to grow as shown by the comparison numbers that follow.

Faculty

Students

FY2003 FY2002 FY2001

87

3,416

76

3,074

70

2,758

Overview of the Financial Statements and Financial Analysis

Gordon College is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2002 and FY 2003.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Gordon College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements.

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major
Annual Financial Report FY 2003 (Version 1.0) 1

categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.
Statement of Net Assets, Condensed

Assets: C urrent Assets C apital Assets, net Other Assets Total Assets
Liabilities: C urrent Liabilities Noncurrent Liabilities Total Liabilities

June 30, 2003
$4,859,332.50 29,519,147.19
10,460.71 34,388,940.40
1,397,656.23 101,254.72
1,498,910.95

June 30, 2002
$5,348,872.91 14,559,468.56
10,832.54 19,919,174.01
1,228,659.43 90,704.45
1,319,363.88

Net Assets: Invested in C apital Assets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects Unrestricted Total Net Assets

29,757,795.62
12,881.08
3,119,352.75 $32,890,029.45

14,559,468.56
12,881.08
4,027,460.49 $18,599,810.13

The total assets of the institution increased by $14,469,766.39. However, a review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $14,959,678.63 of investment in plant, net of accumulated depreciation. See Note 1 in the notes to the financial statements for additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution.

The total liabilities for the year increased by $179,547.07. The primary cause for the increase was in non-current liabilities, primarily $101,254.72 in capital payables, which contributed to the increase in Invested in Capital Assets, net of debt. The combination of the increase in total assets of $14,469,766.39 and the increase in total liabilities of $179,547.07 yields an increase in total net assets of $14,290,219.32. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount 15,198,327.06.
Annual Financial Report FY 2003 (Version 1.0) 2

Statement of Revenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30, 2003

Operating Revenues Operating Expenses Operating Loss

$9,114,300.76 18,643,410.24 (9,529,109.48)

Nonoperating Revenues and Expenses

10,397,955.50

Income (Loss) Before other revenues, expenses, gains or losses

868,846.02

Other revenues, expenses, gains or losses

12,036,988.57

Increase in Net Assets

12,905,834.59

Net Assets at beginning of year, as originally reported C umulative effect of changes in accounting principle Prior Year Adjustments Net Assets at beginning of year, restated

18,599,810.13
1,384,384.73 19,984,194.86

Net Assets at End of Year

$32,890,029.45

June 30, 2002 $8,376,372.77 17,400,306.76 (9,023,933.99) 10,923,913.87
1,899,979.88
1,899,979.88 46,562,413.13 (29,862,582.88) 16,699,830.25 $18,599,810.13

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:

Annual Financial Report FY 2003 (Version 1.0) 3

Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

June 30, 2003

Operating Revenue Tuition and Fees G rants and C ontracts Sales and S ervices of Educational D epartm A ux ilia r y O the r

$2,627,866.62 3,085,259.99 63,718.40 3,272,388.06 65,067.69

Total Operating Revenue

9,114,300.76

Nonoperating Revenue State A ppropriations G ifts Investment Income G rants and C ontracts O the r

10,508,800.00
112,185.30 20,581.29
(223,029.80)

Total Nonoperating Revenue

10,418,536.79

C apital G ifts and Grants State C apital Appropriations Other C apital G ifts and Grants

12,016,407.28

Total C apital Gifts and G rants

12,016,407.28

Total Revenues

$31,549,244.83

June 30, 2002
$2,640,302.14 2,556,007.33 60.00 2,996,094.04 183,909.26 8,376,372.77
10,689,582.41 234,331.46
10,923,913.87
0.00 $19,300,286.64

Annual Financial Report FY 2003 (Version 1.0) 4

Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003 $7,333,626.14
1,347,973.12 1,374,395.52
667,362.35 2,107,974.98 3,025,914.03 2,963,222.58
(177,058.48) 18,643,410.24
$18,643,410.24

June 30, 2002 $5,093,336.45
979,422.73 1,385,754.63 1,805,665.65 2,860,052.42 2,518,211.34 2,757,863.54
17,400,306.76
$17,400,306.76

Utilities increased by approximately $77,464.27 during the past year. The increase was primarily associated with the addition of the 100,000 square foot Instructional Complex that came on line this fiscal year.
Under non-operating revenues (expenses) state appropriations decreased by approximately ($180,782.41). The College had a relatively flat funding year with all things considered.

Statement of Cash Flows
The final statement presented by the Gordon College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Annual Financial Report FY 2003 (Version 1.0) 5

Cash Flows for the Year Ended June 30, 2003, Condensed

Cash Provided (used) By: Operating Activities Non-capital Financing Activities Investing Activities Capital and Related Financing Activities
Net Change in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2003
($9,685,869.64) 10,501,517.08
16,227.93 (1,879,996.50)
(1,048,121.13) 4,813,757.93
$3,765,636.80

Capital Assets
The college had a significant capital asset addition for facilities in fiscal year 2003. Construction of the Instructional Complex was completed and placed into service early in fiscal year 2003. The $12,869,877.01 for this project was funded by the Georgia State Finance and Investment Commission (GSFIC).
Gordon College also completed renovations to Russell Hall academic building and to Alumni Hall gymnasium in FY2003.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Economic Outlook
The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is strong. Even with a relatively flat funded year, the College was able to generate a modest increase in Net Assets. The College anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues.
_______________________ Dr. Lawrence V. Weill, President Gordon College

Annual Financial Report FY 2003 (Version 1.0) 6

Statement of Net Assets
GO RDO N C O LLEGE STA TE M E NT O F NE T A SSE TS
June 30, 2003
ASSETS Cu rre n t A s s e ts C a s h a n d C a s h E q u iv a le n ts S h o rt-te rm In v e s tm e n ts A c c o u n ts R e c e iv a b le , n e t In v e n to rie s O th e r A s s e ts T o ta l C u rre n t A s s e ts
No n c u rre n t A s s e ts Noncurrent C ash In v e s tm e n ts N o te s R e c e iv a b le , n e t C a p ita l A s s e ts , n e t T o ta l N o n c u rre n t A s s e ts TOTAL ASSETS
LIA BILIT IE S Cu rre n t Lia b ilitie s A c c o u n ts P a y a b le a n d A c c ru e d Lia b ilitie s D e p o s its D e fe rre d R e v e nue O th e r Lia b ilitie s D e p o s its H e ld fo r O th e r O rg a n iz a tio n s C o m p e n s a te d A b s e n c e s (c u rre n t p o rtio n ) T o ta l C u rre n t Lia b ilitie s No n c u rre n t Lia b ilitie s C o m p e n s a te d A b s e n c e s Lo n g -te rm Lia b ilitie s T o ta l N o n c u rre n t Lia b ilitie s T OT A L LIA BILIT IE S
NET ASSETS In v e s te d in C a p ita l A s s e ts , n e t o f re la te d d e b t R e s tric te d fo r N o n e x p e n d a b le E x p e n d a b le C a p ita l P ro je c ts U n re s tric te d TOTAL NET ASSETS

June 30, 2003
$ 3 ,7 6 5 ,6 3 6 .8 0 7 6 9 ,7 9 2 .2 5 3 2 1 ,5 7 1 .4 5 2 ,3 3 2 .0 0
4 ,8 5 9 ,3 3 2 .5 0
1 0 ,4 6 0 .7 1 2 9 ,5 1 9 ,1 4 7 .1 9 2 9 ,5 2 9 ,6 0 7 .9 0 3 4 ,3 8 8 ,9 4 0 .4 0
7 4 3 ,4 4 1 .3 9 6 1 6 ,4 6 6 .3 3 1 4 7 ,5 5 8 .2 5 (3 2 2 ,0 6 9 .3 9 ) 2 1 2 ,2 5 9 .6 5 1 ,3 9 7 ,6 5 6 .2 3 1 0 1 ,2 5 4 .7 2 1 0 1 ,2 5 4 .7 2 1 ,4 9 8 ,9 1 0 .9 5
2 9 ,7 5 7 ,7 9 5 .6 2
1 2 ,8 8 1 .0 8 3 ,1 1 9 ,3 5 2 .7 5 $ 3 2 ,8 9 0 ,0 2 9 .4 5

Annual Financial Report FY 2003 (Version 1.0) 7

Statement of Revenues, Expenses and Changes in Net Assets

GORDON COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2003
June 30, 2003

RE VE NU E S

Operating Revenues

Student Tuition and Fees

$4,181,704.08

Less: Sponsored and Unsponsored Scholarships

(1,553,837.46)

Federal Appropriations

Federal Grants and C ontracts

3,080,619.99

State and Local Grants and C ontracts

4,640.00

Nongovernmental Grants and C ontracts Sales and Services of Educational Departments

63,718.40

Auxiliary Enterprises

3,272,388.06

Other Operating Revenues

65,067.69

Total Operating Revenues

9,114,300.76

E XPE NS E S

Operating Expenses

Salaries:

Fa c u lty S ta ff

4,807,119.82 3,535,461.70

B e n e fits Other Personal Services

2,247,869.28 2,024.99

Travel

99,366.07

Scholarships and Fellowships

1,529,250.97

Utilitie s

1,099,077.40

Supplies and Other Services D e pr e c ia tio n

5,160,670.19 162,569.82

Total Operating Expenses

18,643,410.24

Operating Income (loss) NONOPERATING REVENUES (EXPENSES)

(9,529,109.48)

State Appropriations

10,508,800.00

G ifts

Investment Income (endowments, auxiliary and other) Interest Expense (capital assets)

112,185.30

Other Nonoperating Revenues

(223,029.80)

Net Nonoperating Revenues

10,397,955.50

Income before other revenues, expenses, gains, or loss

868,846.02

State C apital Appropriations C apital Grants and Gifts Federal Grants & C ontracts

12,016,407.28 20,581.29

State Grants & C ontracts

Other Grants and C ontracts

Total Other Revenues

12,036,988.57

Increase in Net Assets NET ASSETS

12,905,834.59

Net Assets-beginning of year, as originally reported

18,599,810.13

C umulative effect of changes in accounting principle

Prior Year Adjustments

1,384,384.73

Net Assets-beginning of year, restated

19,984,194.86

Net Assets-End of Year

$32,890,029.45

Annual Financial Report FY 2003 (Version 1.0) 8

Statement of Cash Flows
GORDON COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2003
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities
CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES C apital Grants and Gifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital Debt and Leases Interest Paid on C apital Debt and Leases Net C ash used by C apital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003
$2,724,342.38
2,566,933.83 63,718.40
(8,557,391.64) (8,291,677.39) (1,529,250.97)
713,978.00 1,352,760.35
921,942.10 50,640.00
233,067.61
65,067.69 (9,685,869.64)
10,486,287.18 15,229.90
10,501,517.08
(1,879,996.50)
(1,879,996.50)
112,185.30 (95,957.37) 16,227.93 (1,048,121.13) 4,813,757.93 $3,765,636.80

Annual Financial Report FY 2003 (Version 1.0) 9

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating Activities
Depreciation C hange in Assets and Liabilities:
Receivables, net Inventories Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($9,529,109.48)
162,569.82
(518,326.16) (41,667.56) 1,413.00 91,870.85 96,475.76
50,904.13
($9,685,869.64)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current Assets

$3,765,636.80 $3,765,636.80

** NON-C ASH INVESTING, NON-C APITAL FINANC ING, AND C APITAL AND RELATED FINANC ING TRANSAC TIONS

C hange in fair value of investments recognized as a component of interest i

$95,957.37

Annual Financial Report FY 2003 (Version 1.0) 10

GORDON COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations Gordon College serves the state, and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity Gordon College is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Gordon College as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Gordon College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Gordon College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the College is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of
Annual Financial Report FY 2003 (Version 1.0) 11

materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
Basis of Accounting For financial reporting purposes, the College is considered a special-purpose government engaged only in business-type activities. Accordingly, the College's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-college transactions have been eliminated.
The College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The College accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Consumable supplies are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis.
Annual Financial Report FY 2003 (Version 1.0) 12

Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the College's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Gordon College when complete. For the year ended June 30, 2003, GSFIC transferred capital additions valued at $12,016,407.28 to Gordon College.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a College residence hall.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net
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Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Gordon College had accrued liability for compensated absences in the amount of $262,610.24 as of 7-1-2002. For FY2003, $757,017.33 was earned in compensated absences and employees were paid $706,113.20, for a net increase of $50,904.13. The ending balance as of 6-30-2003 in accrued liability for compensated absences is $313,514.37.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The College's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and
Annual Financial Report FY 2003 (Version 1.0) 14

Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted Total Unrestricted Net Assets

June 30, 2003
$2,413,369.15 488,607.38 217,542.88 (166.66)
$3,119,352.75

When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.

Income Taxes Gordon College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.

Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:

Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.

Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.

Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the College, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees

Annual Financial Report FY 2003 (Version 1.0) 15

and other student charges, the College has recorded contra revenue for sponsored and unsponsored scholarships.
Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus Gordon College) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus Gordon College), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Annual Financial Report FY 2003 (Version 1.0) 16

Categorization of Deposits
The College's cash deposits are categorized by risk as follows:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the College or by its agent in the College's name.
Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the College's name.
Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the College's name, and amounts uncollateralized.
Cash Deposits as of June 30, 2003

Cash Deposits Investment Portfolio Accounts
Total Cash Deposits

C arrying Amount
$235,601.47

Bank Balances
$326,578.72

$235,601.47

$326,578.72

Risk Categories

1

2

3

$100,000.00

$0.00 $226,578.72

$100,000.00

$0.00 $226,578.72

Categorization of Investments
The College's investments are categorized as to credit risk within the three categories described below:
Category 1 - Insured or registered, or securities held by the College or its agent in the College's name
Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the College's name.
Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the College's name.

Annual Financial Report FY 2003 (Version 1.0) 17

At June 30, 2003, the College's investments consisted of the following:

Type of Investments
C ommon Stock C orporate Bonds Securities and C orporate O b lig a tio n s

Risk C ategories

1

2

$0.00

$0.00

3 $0.00

C arrying Amount
$0.00 0.00 0.00

T o ta ls

$0.00

$0.00

$0.00

$0.00

Investments Not Subject to C ategorizations: Board of Regents
Short-Term Fund Balanced Income Fund Total Return Fund Investment Portfolio Accounts Mutual Funds Real Estate State Investment Pool Short-Term Investments
Total Investments

3,530,035.33 $3,530,035.33

Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the College did not own any specific, identifiable investment securities of the pool.

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2003.

S tu d e n t T u itio n a n d Fe e s A u x ilia ry E n te rp ris e s a n d O th e r O p e ra tin g A c tiv itie s Fe d e ra l, S ta te , a n d P riv a te Fu n d s O th e r
Le s s A llo w a n c e fo r D o u b tfu l A c c o u n ts
N e t A c c o u n ts R e c e iv a b le

June 30, 2003
$ 5 9 ,0 2 5 .8 6 3 ,3 6 0 .0 3
7 2 6 ,3 0 9 .4 3 1 0 ,6 5 2 .3 8
7 9 9 ,3 4 7 .7 0 2 9 ,5 5 5 .4 5
$ 7 6 9 ,7 9 2 .2 5

Annual Financial Report FY 2003 (Version 1.0) 18

Note 4. Inventories

Inventories consisted of the following at June 30, 2003.

Bo o ks to re Fo o d Se rvice s P hys ica l P la n t O the r
Tota l

June 30, 2003 $288,049.17
33,522.28 $321,571.45

Note 5. Notes/Loans Receivable
Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2003 and 2002. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the College for amounts cancelled under these provisions. As the College determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education.

Annual Financial Report FY 2003 (Version 1.0) 19

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2003.

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$240,541.04 376,774.40 617,315.44

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

2,678,474.56 18,052,619.02
1,125,187.35 3,078,405.65
2,185,897.44
27,120,584.02

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

1,194,303.73 7,681,836.06
761,231.66 1,743,735.89
1,797,323.56
13,178,430.90

Total Capital Assets, Being Depreciated, Net 13,942,153.12

Capital Assets, net

$14,559,468.56

Additions
$47,000.00 458,085.04 505,085.04
20,581.29 13,499,823.96
1,112,851.38
142,719.11
14,775,975.74
108,303.86 483,039.52
68,849.97 367,546.73
97,566.90 166.66
1,125,473.64
13,650,502.10
$14,155,587.14

Reductions $0.00 0.00

Ending Balance 6/30/2003
$287,541.04 834,859.44
1,122,400.48

10,039.18 387,509.06
431.69
397,979.93

2,699,055.85 31,552,442.98
1,115,148.17 3,803,747.97
0.00 2,328,184.86
0.00 41,498,579.83

119,430.38 768,183.61
76,123.17 238,334.26
1,202,071.42

1,183,177.21 7,396,691.97
753,958.46 1,872,948.36
0.00 1,894,890.46
166.66 13,101,833.12

(804,091.49) 28,396,746.71

($804,091.49) $29,519,147.19

Annual Financial Report FY 2003 (Version 1.0) 20

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2003.

P re p a id T u itio n a n d Fe e s R e se a rch O th e r D e fe rre d R e v e n u e
T o ta ls

June 30, 2003 $ 54 6 ,6 94 .34 6 9 ,7 71 .99 $ 61 6 ,4 66 .33

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2003 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2002
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2003

$0.00

$0.00

Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total

262,610.24 262,610.24

757,017.33 757,017.33

706,113.20 706,113.20

313,514.37 0.00
313,514.37

Total Long Term Obligations

$262,610.24 $757,017.33

$706,113.20 $313,514.37

(a) The beginning balance includes the amount shown as current in FY2002 and reclassified as long-term in FY2003.

Current Portion
$0.00
212,259.65 212,259.65 $212,259.65

Note 9. Lease Obligations Gordon College had no lease obligations as of June 30, 2003.

Annual Financial Report FY 2003 (Version 1.0) 21

Note 10. Retirement Plans

Teachers Retirement System Of Georgia

Plan Description Gordon College participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Gordon College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Gordon College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$456,103.46 $413,266.35 $440,743.97

Regents Retirement Plan

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.

Funding Policy Gordon College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statue and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation. Employees contribute 5% of their earnable

Annual Financial Report FY 2003 (Version 1.0) 22

compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.
Gordon College and the covered employees made the required contributions of $271,713.88 (10.02%) and $135,586.84 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description Gordon College participates in the Georgia Defined Contribution Plan (GDCP) which is a singleemployer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $19,878.33 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
Gordon College is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Gordon College and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue
Annual Financial Report FY 2003 (Version 1.0) 23

Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Gordon College, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Gordon College expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Gordon College (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
Note 13. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University
Annual Financial Report FY 2003 (Version 1.0) 24

System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 21 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, Gordon College recognized as incurred $92,881.34 of expenditures, which was net of $71,011.42 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 25

Note 14. Natural Classifications With Functional Classifications The College's operating expenses by functional classification for FY 2003 are shown below:

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003
Functional Classification FY2003

Natural Classification

Instruction

Research

Public S e r v ic e

A ca de m ic Support

F aculty Staff B enefits P erso nal Services T ravel S c ho la rs hips a nd F e llo ws hips Utilities Supplies and Others Services D epreciatio n

$ 4,854,351.53 183,741.65
1,179,040.04
30,997.44
41,374.45 982,113.12 62,007.91

$ 0.00

$ 0.00

($ 47,231.71) 755,152.26 185,651.56
9,022.59
28,117.03 300,945.58
116,315.81

T o t a l E xpe ns e s

$ 7,333,626.14

$ 0.00

$ 0.00

$ 1,347,973.12

S tu d e n t Services
$ 0.00 754,746.66 193,569.75
70.00 24,751.30
20,525.96 380,731.85
$ 1,374,395.52

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003

Natural Classification

Institutional Support

Plant Operations & Maintenance

Functional Classification FY2003

Scholarships & Fellowships

Auxiliary Enterprises

Unallocated Expenses

F ac ult y Staff B e ne f it s P ersonal Services T ravel Scholarships and Fellowships Ut ilit ie s Supplies and Others Services D eprec iat io n

$0.00 888,937.89 449,553.17
1,175.00 16,220.89 (1,553,837.46) 34,000.38 829,220.33 2,092.15

$0.00 697,705.20 210,774.08 (135,932.38)
1,662.21
906,884.21 413,210.93 13,670.73

$0.00 3,025,914.03

$0.00 255,178.04 29,280.68 136,712.37
16,711.64 57,174.40 68,175.37 2,301,448.38 98,541.70

$0.00
(47,000.00) (130,058.48)

Total Expenses

$667,362.35

$2,107,974.98

$3,025,914.03

$2,963,222.58

($177,058.48)

Total Expenses
$4,807,119.82 3,535,461.70 2,247,869.28
2,024.99 99,366.07 1,529,250.97 1,099,077.40 5,160,670.19 162,569.82
$18,643,410.24

Annual Financial Report FY 2003 (Version 1.0) 26

Georgia Southern University
Financial Report
For the Year Ended June 30, 2003

Dr. Bruce Grube
President

Georgia Southern University Statesboro, Georgia
Dr. Ronald Core
Senior Vice President for Fiscal Affairs

Georgia Southern University ANNUAL FINANCIAL REPORT
FY 2003
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 7 Statement of Revenues, Expenses and Changes in Net Assets............................................ 8 Statement of Cash Flows ..................................................................................................... 9 Note 1 Summary of Significant Accounting Policies ...................................................... 11 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 16 Note 3 Accounts Receivable............................................................................................. 18 Note 4 Inventories............................................................................................................. 19 Note 5 Notes/Loans Receivable........................................................................................ 19 Note 6 Capital Assets........................................................................................................ 20 Note 7 Deferred Revenue.................................................................................................. 21 Note 8 Long-Term Liabilities ........................................................................................... 21 Note 9 Lease Obligations.................................................................................................. 22 Note 10 Retirement Plans ................................................................................................. 24 Note 11 Risk Management................................................................................................ 25 Note 12 Contingencies...................................................................................................... 26 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 26 Note 14 Natural Classifications With Functional Classifications..................................... 28

Georgia Southern University
Management's Discussion and Analysis

Introduction

Georgia Southern University is the largest and most comprehensive center of higher education in

the southern half of Georgia. A residential campus of 15,700 students (Fall 2003), Georgia

Southern is one of the top universities of choice in Georgia for incoming Hope Scholars. The

University's hallmark is a superior undergraduate experience emphasizing academic programs

from baccalaureates to doctorates in its seven Colleges: Liberal Arts and Social Sciences,

Business Administration; Education; Health and Human Sciences; The Jack N. Averitt College

of Graduate Studies; and the Allen E. Paulson College of Science and Technology. The College

of Information Technology became our seventh college on July 1, 2003. The University has

earned national accreditation in 79 program areas. Founded in 1906, the University is located in

Statesboro. The University's enrollment continues to increase to record levels even as

admissions standards are raised.

Faculty

Students

FY2003 FY2002 FY2001

596

15,075

593

14,371

610

14,184

Overview of the Financial Statements and Financial Analysis

Georgia Southern University is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2002 and FY 2003.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Georgia Southern University. The Statement of Net Assets presents end-ofyear data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements.

Annual Financial Report FY 2003 (Version 1.0) 1

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets

June 30, 2003
$31,278,975.53 164,045,245.81
5,109,527.40 200,433,748.74

June 30, 2002
$31,236,560.52 134,783,438.38
3,079,724.61 169,099,723.51

Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities

13,236,877.47 3,862,408.37
17,099,285.84

11,953,639.17 2,631,841.60
14,585,480.77

Net A ssets: Invested in C apital A ssets, ne t of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets

161,066,286.66 2,222,610.69 3,254,890.87
16,790,674.68 $183,334,462.90

132,144,184.58 2,159,373.77 3,235,052.41
16,975,631.98 $154,514,242.74

The total assets of the institution increased by $31,334,025.23. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $28,922,102.08 of investment in plant, net of accumulated depreciation. See Note 1 in the notes to the financial statements for additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets. Other asset categories, current and noncurrent, remained consistent with the previous year presented.
The total liabilities for the year increased by $2,513,805.07. Current liabilities increased by $1,283,238 due to recent increases in enrollment for FY2004 which is reflected in liabilities of
Annual Financial Report FY 2003 (Version 1.0) 2

Deferred Revenue and Residence Hall deposits. The combination of the increase in total assets of $31,334,025.23 and the increase in total liabilities of $2,513,805.07 yields an increase in total net assets of $28,820,220.16.

Statement of Revenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30, 2003

Operating Revenues Operating Expenses Operating Loss

$118,675,047.31 196,995,706.58 (78,320,659.27)

Nonoperating Revenues and Expenses

76,066,272.74

Incom e (Loss) B efore other revenues, expenses, gains or losses

(2,254,386.53)

Other revenues, expenses, gains or losses

23,783,272.33

Increase in Net Assets

21,528,885.80

Net Assets at beginning of year, as originally reported C um ulative effect of changes in accounting principle Prior Year Adjustm ents Net Assets at beginning of year, restated

154,514,242.74
7,291,334.36 161,805,577.10

Net Assets at End of Year

$183,334,462.90

June 30, 2002 $110,099,359.36
186,551,550.62 (76,452,191.26) 80,107,262.80
3,655,071.54 17,653,923.39 21,308,994.93 274,416,075.23 141,210,827.42 133,205,247.81 $154,514,242.74

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:
Annual Financial Report FY 2003 (Version 1.0) 3

Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

Operating Revenue Tuition and Fees Grants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O th e r
Total Operating Revenue
Nonoperating Revenue State Appropriations G ifts Investment Incom e Grants and C ontracts O th e r
Total Nonoperating Revenue
C apital Gifts and G rants State C apital Appropriations Other C apital G ifts and Grants
Total C apital G ifts and G rants
Total Revenues

June 30, 2003

June 30, 2002

$29,787,074.97 53,667,582.50 1,895,779.34 32,002,011.48 1,322,599.02
118,675,047.31

$27,800,932.55 48,859,552.43 1,762,543.61 30,413,589.01 1,262,741.76
110,099,359.36

75,763,268.44 641,277.40 (193,011.78)
76,211,534.06

79,298,561.00 960,810.53 (152,108.73)
80,107,262.80

23,750,841.26 32,431.07
23,783,272.33
$218,669,853.70

17,653,923.39
17,653,923.39 $207,860,545.55

Annual Financial Report FY 2003 (Version 1.0) 4

Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003
$59,469,326.03 1,922,609.26 2,152,793.08
11,634,180.08 13,117,500.50 17,823,907.02 18,652,833.85 43,212,825.69 29,009,731.07
196,995,706.58
145,261.32
$197,140,967.90

June 30, 2002
$57,755,227.99 1,858,539.52 2,194,832.99
10,088,824.87 11,501,828.66 17,049,471.56 18,548,852.40 39,361,463.09 28,192,509.54
186,551,550.62
$186,551,550.62

Operating revenue increased in the amount of $8,575,688 primarily in revenues related to student tuition, fees and student service operations. The revenue increase is directly related to significant increases in enrollment during fiscal year 2003. Corresponding increases in operating expenses for instruction and student service operations also reflect enrollment increases. Expenditures for support functions did not significantly increase over fiscal year 2002 levels.
Non-operating revenues decreased by $3,895,728 primarily due to decrease in state appropriations of $3,525,493. Decreases in investment income were also experienced due to reduced interest rates.
Statement of Cash Flows
The final statement presented by the Georgia Southern University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases,
Annual Financial Report FY 2003 (Version 1.0) 5

proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Year Ended June 30, 2003, Condensed

C ash Provided (used) By: Operating A ctivities Non-capital Financing Activities Investing Activities C apital and Related Financing A ctivities
Net C hange in C ash C ash, Beginning of Year
C ash, End of Year

($ 7 1 ,3 8 8 ,1 4 3 .4 8 ) 7 5 ,1 4 4 ,6 6 3 .7 6 4 5 6 ,9 2 0 .2 3 (5 ,3 2 1 ,4 2 1 .1 1 )
(1 ,1 0 7 ,9 8 0 .6 0 ) 1 9 ,2 1 8 ,4 1 0 .5 8
$ 1 8 ,1 1 0 ,4 2 9 .9 8

Capital Assets

The University had three significant capital asset additions for facilities in fiscal year 2003. Major renovations were completed on the Fine Arts Building and the Rosenwald Building. The Science Nursing building was completed and put into operation in the later portion of fiscal year 2003.

The Fine Arts Building renovation and new construction of the Science Nursing Building were funded by Georgia State Finance and Investment Commission (GSFIC). Total project costs were $4,273,144 and $19,463,463, respectively. The new College of Information Technology building funded by GSFIC and completed early in fiscal year 2004 with project building costs of $28,107,413 and equipment costs of $3,316431. Capital project funding by GSFIC for FY2004 will include major renovation of the GSU Library.

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Economic Outlook

Increasing enrollment and decreasing state appropriated funds are placing significant strains on University resources. University administration is seeking methods to reduce costs and redistribute funds to meeting the demands of budget shortfalls, while continuing to address the educational needs of our students in an effort to produce a more educated Georgia.

_______________________ Dr. Bruce Grube, President Georgia Southern University

Annual Financial Report FY 2003 (Version 1.0) 6

Statement of Net Assets

GEORGIA SOUTHERN UNIVERSITY STATEMENT OF NET ASSETS June 30, 2003
ASSETS Current Assets C ash and C ash Equivalents S hort-term Investm ents A ccounts Receivable, net I n v e n to r ie s Othe r A ssets Total C urrent A ssets

June 30, 2003
$18,110,429.98 3,600,000.00 5,397,772.39 1,685,249.50 2,485,523.66
31,278,975.53

Noncurrent Assets Noncurrent C ash Investm ents Notes Receivable, net C apital A ssets, net Total Noncurrent A ssets TOTAL ASSETS

2,100,426.39 3,009,101.01 164,045,245.81 169,154,773.21 200,433,748.74

LIA BILIT IE S Current Liabilities
A ccounts Payable and A ccrued Liabilities D eposits Deferred Revenue Othe r Liabilities D eposits He ld for Other Organizations C om pensated A bsences (current portion)
Total C urrent Liabilities Noncurrent Liabilities
C om pensated A bsences Long-term Liabilities
Total Noncurrent Liabilities TOTAL LIABILITIES

2,587,979.16 893,050.00
6,248,452.56 119,217.23 846,412.77
2,541,765.75 13,236,877.47
1,291,968.41 2,570,439.96 3,862,408.37 17,099,285.84

NET ASSETS Invested in C apital A ssets, net of related debt Restricted for No ne x p e nd a b le Ex p e nd a b le C apital Projects U n r e s tr ic te d TOTAL NET ASSETS

161,066,286.66
2,222,610.69 3,254,890.87
16,790,674.68 $183,334,462.90

Annual Financial Report FY 2003 (Version 1.0) 7

Statement of Revenues, Expenses and Changes in Net Assets

GEORGIA SOUTHERN UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2003

June 30, 2003

REVENUES

Operating Revenues

Student Tuition and Fees

$36,686,348.61

Less: Sponsored and Unsponsored Scholarships

(6,899,273.64)

Federal Appropriations

Federal Grants and C ontracts

53,213,625.59

State and Local Grants and C ontracts

160,859.90

Nongovernmental Grants and C ontracts

293,097.01

Sales and Services of Educational Departments

1,895,779.34

Auxiliary Enterprises

32,002,011.48

Other Operating Revenues

1,322,599.02

Total Operating Revenues

118,675,047.31

EXPENSES

Operating Expenses

Salaries:

Faculty

36,413,971.48

Staff

45,867,568.13

Benefits Other Personal Services

22,804,471.04 1,141.52

Travel

2,217,447.29

Scholarships and Fellowships

45,323,137.09

Utilities

5,234,317.59

Supplies and Other Services Depreciation

31,749,057.25 7,384,595.19

Total Operating Expenses

196,995,706.58

Operating Income (loss) NONOPERATING REVENUES (EXPENSES)

(78,320,659.27)

State Appropriations

75,763,268.44

Gifts

Investment Income (endowments, auxiliary and other) Interest Expense (capital assets)

641,277.40 (145,261.32)

Other Nonoperating Revenues

(193,011.78)

Net Nonoperating Revenues

76,066,272.74

Income before other revenues, expenses, gains, or loss

(2,254,386.53)

State C apital Appropriations

23,750,841.26

C apital Grants and Gifts

32,431.07

Federal Grants & C ontracts

State Grants & C ontracts

Other Grants and C ontracts

Total Other Revenues

23,783,272.33

Increase in Net Assets NET ASSETS

21,528,885.80

Net Assets-beginning of year, as originally reported

154,514,242.74

C umulative effect of changes in accounting principle

Prior Year Adjustments

7,291,334.36

Net Assets-beginning of year, restated

161,805,577.10

Net Assets-End of Year

$183,334,462.90

Annual Financial Report FY 2003 (Version 1.0) 8

Statement of Cash Flows
GEORGIA SOUTHERN UNIVERSITY STATEMENT OF C ASH FLOWS
For the Year Ended June 30, 2003
CASH F LOWS F ROM OPE RATING A CTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales and Services of Educational D epartments Paym ents to Suppliers Paym ents to Em ployees Paym ents for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Em ployees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities
CASH F LOWS F ROM NON- CAPITA L F INANCING ACTIVIT IE S State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing A ctivities
CASH F LOWS F ROM CAPIT AL AND RELATED F INA NCING A CTIVITIES C apital Grants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities
CASH F LOWS F ROM INVESTING ACT IVITIES Proceeds from Sales and Maturities of Investments Interest on Investm ents Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003
$36,773,021.44
53,613,477.29 1,944,326.98
(64,459,144.24) (81,965,822.14) (52,222,410.73)
(404,801.69) 511,926.29
7,611,292.27 8,415,406.66 6,314,347.17
995,769.14 2,292,930.37 5,928,265.26
606,722.36 2,656,550.09 (71,388,143.48)
75,095,950.56 48,713.20
75,144,663.76
(5,114,758.15) (61,401.64)
(145,261.32) (5,321,421.11)
(167,606.12) 624,526.35
456,920.23 (1,107,980.60) 19,218,410.58 $18,110,429.98

Annual Financial Report FY 2003 (Version 1.0) 9

Statement of Cash Flows, Continued
RECONCILIA TION OF OPERA TING LOSS TO NET CA SH PROVIDE D (USED) BY OPERATING A CTIVITIES:
Operating Incom e (loss) A djustments to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating Activities
D epreciation C hange in Assets and Liabilities:
Receivables, net I n v e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($78,320,659.27)
7,384,595.19
(11,920.12) 67,693.20 (3,012,377.43) 408,173.89 938,297.08 971,414.80 186,639.18
($71,388,143.48)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current A ssets

$18,110,429.98 $18,110,429.98

** NON-C ASH INVESTING, NON-C APITAL FINANC ING, AND C APITAL AND RELATED FINANC ING TRANSAC TIONS

Fixed assets acquired by incurring capital lease obligations C hange in fair value of investm ents recognized as a com ponent of interest i

$62,553.06 $99,595.39

Annual Financial Report FY 2003 (Version 1.0) 10

Georgia Southern University NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations Georgia Southern University serves the state, and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity Georgia Southern University is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Georgia Southern University as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Georgia Southern University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Georgia Southern University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of
Annual Financial Report FY 2003 (Version 1.0) 11

materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
Basis of Accounting For financial reporting purposes, the University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-university transactions have been eliminated.
The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Consumable supplies and resale inventories are valued at cost using the average-cost basis.
Annual Financial Report FY 2003 (Version 1.0) 12

Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Georgia Southern University when complete. For the year ended June 30, 2003, GSFIC transferred capital additions valued at $23,237,162.76 to Georgia Southern University.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net
Annual Financial Report FY 2003 (Version 1.0) 13

Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Georgia Southern University had accrued liability for compensated absences in the amount of $3,647,094.98 as of 7-1-2002. For FY2003, $2,899,243.43 was earned in compensated absences and employees were paid $2,712,604.25, for a net increase of $186,639.18. The ending balance as of 6-30-2003 in accrued liability for compensated absences is $3,833,734.16.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The University's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and
Annual Financial Report FY 2003 (Version 1.0) 14

Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Reserve Reserve for Encumbrances Reserve for Inventory O ther Unrestricted Total Unre stricted Net A ssets

June 30, 2003
$2,670,468.59 7,481,211.19 205,000.00 6,433,994.90
$16,790,674.68

When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes Georgia Southern University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues The University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees
Annual Financial Report FY 2003 (Version 1.0) 15

and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships.
Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus Georgia Southern University) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus Georgia Southern University), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Annual Financial Report FY 2003 (Version 1.0) 16

Categorization of Deposits
The University's cash deposits are categorized by risk as follows:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the University or by its agent in the University's name.
Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University's name.
Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the University's name, and amounts uncollateralized.
Cash Deposits as of June 30, 2003

Cash Deposits Investment Portfolio Accounts
Total Cash Deposits

Carrying Amount
$18,098,452.44 11,977.54

Bank Balances
$21,174,373.11 11,977.54

$18,110,429.98

$21,186,350.65

Risk Categories

1

2

$0.00 $18,098,452.44 11,977.54

$0.00 $18,110,429.98

3 $0.00
$0.00

Categorization of Investments
The University's investments are categorized as to credit risk within the three categories described below:
Category 1 - Insured or registered, or securities held by the University or its agent in the University's name
Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name.
Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University's name.

Annual Financial Report FY 2003 (Version 1.0) 17

At June 30, 2003, the University's investments consisted of the following:

Type of Investm ents
Life Insurance C orporate B onds S ecurities and C orporate O bligations

Risk C ategories

1

2

$0.00

$7,629.62

3 $0.00

C arrying Amount
$7,629.62

T o ta ls

$0.00

$7,629.62

$0.00

$7,629.62

Investm ents Not S ubject to C ategorizations: B oard of Regents
S hort-Term Fund Balanced Income Fund Total Return Fund Investm ent Portfolio A ccounts Mutual Funds R eal Estate S tate Inve stm ent Pool S hort-Term Investm ents
Total Investm ents

29,981.92 2,092,796.77
3,600,000.00 $5,730,408.31

Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool.

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2003.
June 30, 2003

S tudent Tuition and Fees A uxiliary Enterprises and Other Operating A ctivities Fede ral, S tate , and Private Funds O the r
Less A llowance for D oubtful A ccounts

$368,294.32 1,017,538.66 2,671,924.61 1,389,154.51 5,446,912.10
49,139.71

Net A ccounts Receivable

$5,397,772.39

Annual Financial Report FY 2003 (Version 1.0) 18

Note 4. Inventories

Inventories consisted of the following at June 30, 2003.
June 30, 2003

B ookstore Food Services Physical Plant O ther
T o ta l

$1,335,177.44 184,133.69 76,967.25 88,971.12
$1,685,249.50

Note 5. Notes/Loans Receivable
Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2003 and 2002. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions.

Annual Financial Report FY 2003 (Version 1.0) 19

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2003:

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$1,862,841.20
1,862,841.20

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

13,311,925.00 184,471,671.00
173,756.20 17,276,194.52
55,394.76 29,443,123.57
320,659.00 245,052,724.05

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

10,875,365.66 64,623,380.23
11,543.22 12,874,116.03
45,164.03 23,479,670.81
222,886.89 112,132,126.87

Total Capital Assets, Being Depreciated, Net 132,920,597.18

Capital Assets, net

$134,783,438.38

Additions
$49,258.38 2,618,707.36 2,667,965.74

Reductions $0.00 0.00

Ending Balance 6/30/2003
$1,912,099.58 2,618,707.36 4,530,806.94

23,818,332.52
2,231,285.40 45,804.60
1,104,547.64 13,140.00
27,213,110.16

166,462.20 2,169,232.54
26,332.96 214,531.00
96,253.61 2,672,812.31

13,311,925.00 208,290,003.52
7,294.00 17,338,247.38
74,866.40 30,333,140.21
237,545.39 269,593,021.90

274,174.74 4,187,097.48
34,795.26 1,639,735.18
9,856.64 1,236,975.00
1,960.89 7,384,595.19
19,828,514.97
$22,496,480.71

1,087,536.57 6,454,500.81
45,544.24 1,615,837.81
20,188.60 214,531.00
9,438,139.03

10,062,003.83 62,355,976.90
794.24 12,898,013.40
34,832.07 24,502,114.81
224,847.78 110,078,583.03

(6,765,326.72) 159,514,438.87

($6,765,326.72) $164,045,245.81

Annual Financial Report FY 2003 (Version 1.0) 20

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2003.
June 30, 2003

Prepaid Tuition and Fees Research O the r D eferred Re venue

$5,292,740.06 955,712.50

T o ta ls

$6,248,452.56

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2003 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total
Total Long Term Obligations

Beginning Balance July 1, 2002
$2,631,841.60

Additions $0.00

Reductions

Ending Balance June 30, 2003

$61,401.64 $2,570,439.96

Current Portion
$0.00

3,647,094.98 3,647,094.98

2,899,243.43 2,899,243.43

2,712,604.25 2,712,604.25

3,833,734.16 0.00
3,833,734.16

2,541,765.75 2,541,765.75

$6,278,936.58 $2,899,243.43 $2,774,005.89 $6,404,174.12 $2,541,765.75

(a) The beginning balance includes the amount shown as current in FY2002 and reclassified as long-term in FY2003.

Annual Financial Report FY 2003 (Version 1.0) 21

Note 9. Lease Obligations
Georgia Southern University is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property.
Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2003, were as follows:

Year Ending June 30:

Year

2004

1

2005

2

2006

3

2007

4

2008

5

2009 through 2011

6-10

2012 through 2018

11-15

2019 through 2023

16-20

2024 through 2028

21-25

2029 through 2033

26-30

2034 through 2038

31-35

2039 through 2043

36-40

Total m inim um lease paym ents

Less: Interest

Less: Executory costs (if paid)

Principal O utstanding

Real Property

C apital Lease s

Operating Leases

$205,320.10 205,320.10 205,320.10 205,320.10 205,320.10
1,026,600.50 1,026,600.50 1,026,600.50
307,980.15

$11,682.60 11,682.60 11,682.60 7,430.61

4,414,382.15 1,843,942.19
$2,570,439.96

$42,478.41

CAPITAL LEASES

Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2004 and 2025. Expenditures for fiscal year 2003 were $205,320.10 of which $143,918.82 represented interest. Total principal paid on capital leases was $61,401.28 for the fiscal year ended June 30, 2003. The interest rate for this capital lease is 5.50 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2003:

Buildings Totals

$ 5,407,000.00 $ 5,407,000.00

Annual Financial Report FY 2003 (Version 1.0) 22

Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms.
Georgia Southern University had one capital lease with related entities in the current fiscal year. In March 1995, Georgia Southern University entered into a capital lease of $3,000,000.00 at 5.5 percent with the Georgia State Financing & Investment Commission, a party external to the system, whereby the University leases a building for a thirty-year period that began March 1995 and expires February 2025. The outstanding liability at June 30, 2003 on the capital lease is $2,570,439.96.
OPERATING LEASES
Georgia Southern University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2004 through 2008. Certain operating leases provide for renewal options for periods from one to four years at their fair rental value at the time of renewal. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment.
In October 1997, Georgia Southern University entered into a real property operating lease with the General Motors Acceptance Corporation, a party external to the system, for a 1998 Chevrolet Van. The lease purchase will cover the period form October 1997 through October 2002 with month payments of $559.05. The terms of this agreement were completed during fiscal year 2003 and Georgia Southern University now owns the property.
During fiscal year 2003, Georgia Southern University entered into three real property operating leases with Coyle Business Products, a party external to the system, for digital copiers. The lease purchases will cover a period from July 2002 through April 2007 with monthly payments of $973.55.
Noncancellable operating lease expenditures in 2003 were $8,535.95 for real property.
The outstanding liability at June 30, 2003 on the operating leases is $58,538.58.
Annual Financial Report FY 2003 (Version 1.0) 23

Note 10. Retirement Plans

Teachers Retirement System Of Georgia

Plan Description Georgia Southern University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Georgia Southern University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Georgia Southern University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$ 4,303,790.46 $ 4,000,635.60 $ 5,068,260.20

Regents Retirement Plan

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.

Funding Policy Georgia Southern University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statue and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation. Employees

Annual Financial Report FY 2003 (Version 1.0) 24

contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.
Georgia Southern University and the covered employees made the required contributions of $2,986,039.62 (10.02%) and $ 1,484,615.37 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description Georgia Southern University participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $ 181,264.48 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
Georgia Southern University is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Georgia Southern University and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per person and dental coverage up
Annual Financial Report FY 2003 (Version 1.0) 25

to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Georgia Southern University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Georgia Southern University expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Georgia Southern University (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
Note 13. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the
Annual Financial Report FY 2003 (Version 1.0) 26

group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 485 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, Georgia Southern University recognized as incurred $ 1,548,273.00 of expenditures, which was net of $ 516,291.00 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 27

Note 14. Natural Classifications With Functional Classifications The University's operating expenses by functional classification for FY2003 are shown below:

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003
Functional Classification FY2003

Natural Classification

Instruction

Research

Public Service

Academic Support

Faculty Staff B enefit s Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciatio n

$ 35,338,470.40 7,312,046.45 10,486,406.14 326.08 631,143.95 123,943.20 612,513.91 4,223,537.19 740,938.71

$ 545,128.86 583,535.45
158,171.62
120,275.49 10,958.00 12,442.85
459,759.76 32,337.23

$ 231,099.27 881,156.62 197,394.90 1,274.46 101,647.62 142,168.70 21,244.70 576,806.81

$ 281,635.51 6,328,593.36 1,579,800.01
1,975.75 186,627.39 141,157.37 142,855.49 1,569,686.37 1,401,848.83

Total Expenses

$ 59,469,326.03

$ 1,922,609.26

$2,152,793.08

$ 11,634,180.08

Student Services
$ 16,387.44 7,733,455.28
1,851,018.64 611.29
258,665.70 2,250.00
238,089.35 2,923,150.63
93,872.17
$ 13,117,500.50

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003

Natural Classification

Institutional Support

Plant Operations & Maintenance

Functional Classification FY2003

Scholarships & Fellowships

Auxiliary Enterprises

Unallocated Expenses

Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation

$1,250.00 8,934,968.04 4,851,567.47
2,257.96 130,508.21
201,198.02 3,480,329.26
221,828.06

$0.00 6,482,609.49 2,098,470.10 (580,693.88)
19,053.61
2,634,870.43 4,282,272.13 3,716,251.97

$0.00
43,197,777.19 15,048.50

$0.00 7,611,203.44 1,581,642.16 575,389.86 769,525.32 1,704,882.63 1,371,102.84 14,218,466.60 1,177,518.22

$0.00

Total Expenses

$17,823,907.02

$18,652,833.85

$43,212,825.69

$29,009,731.07

$0.00

Total Expenses
$36,413,971.48 45,867,568.13 22,804,471.04
1,141.52 2,217,447.29 45,323,137.09 5,234,317.59 31,749,057.25 7,384,595.19
$196,995,706.58

Annual Financial Report FY 2003 (Version 1.0) 28

GEORGIA SOUTHWESTERN STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2003

Georgia Southwestern State University Americus, Georgia

Dr. Michael Hanes
President

Dr. C. Alan Parks
Vice President for Fiscal Affairs

GEORGIA SOUTHWESTERN STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2003
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 7 Statement of Revenues, Expenses and Changes in Net Assets............................................ 8 Statement of Cash Flows ..................................................................................................... 9 Note 1 Summary of Significant Accounting Policies ...................................................... 11 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 17 Note 3 Accounts Receivable............................................................................................. 19 Note 4 Inventories............................................................................................................. 20 Note 5 Notes/Loans Receivable........................................................................................ 20 Note 6 Capital Assets........................................................................................................ 21 Note 7 Deferred Revenue.................................................................................................. 21 Note 8 Long-Term Liabilities ........................................................................................... 22 Note 9 Lease Obligations.................................................................................................. 23 Note 10 Retirement Plans ................................................................................................. 24 Note 11 Risk Management................................................................................................ 25 Note 12 Contingencies...................................................................................................... 26 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 26 Note 14 Natural Classifications With Functional Classifications..................................... 28

GEORGIA SOUTHWESTERN STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Georgia Southwestern State University is one of the 34 institutions of the University System of Georgia. The University, located in Americus, Georgia, was founded in 1906. The University offers baccalaureate and masters degrees in a wide variety of subjects. This wide range of educational opportunities attracts a highly qualified faculty and a student body of more than 2,500 students each year, as shown below.

Faculty

Students

FY2003 FY2002 FY2001

109

2,508

111

2,535

112

2,622

Overview of the Financial Statements and Financial Analysis

Georgia Southwestern State University is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2002 and FY 2003.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Georgia Southwestern State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and noncurrent), and Net Assets (Assets minus Liabilities). The difference between current and noncurrent assets will be discussed in the footnotes to the financial statements.

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

Annual Financial Report FY 2003 (Version 1.0) 1

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

Assets: C urrent Assets C apital Assets, net Other Assets Total Assets

June 30, 2003
$3,967,968.09 17,203,160.12
1,369,429.89 22,540,558.10

June 30, 2002
$4,346,635.53 14,288,648.82
1,447,731.49 20,083,015.84

Liabilities: C urrent Liabilities Noncurrent Liabilities Total Liabilities

3,185,012.86 376,899.76
3,561,912.62

3,518,726.27 3,518,726.27

Net Assets: Invested in C apital Assets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects Unrestricted Total Net Assets

17,203,160.12 353,799.58
1,421,685.78 $18,978,645.48

14,288,648.82 353,799.58
1,921,841.17 $16,564,289.57

The total assets of the institution increased by $2,457,542.26. However, a review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $2,920,528.30 of investment in plant, net of accumulated depreciation. See Note 1 in the notes to the financial statements for additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets. Many of the other asset categories, current and noncurrent, showed a decrease during the year. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution.
The total liabilities for the year decreased by $43,186.35. The combination of the increase in total assets of $2,457,542.26 and the decrease in total liabilities of $43,186.35 yields an increase
Annual Financial Report FY 2003 (Version 1.0) 2

in total net assets of $2,414,355.91. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $2,914,511.30.

Statement of Revenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30, 2003

Operating Revenues Operating Expenses Operating Loss

$15,918,991.54 30,435,301.75 (14,516,310.21)

Nonoperating Revenues and Expenses

13,272,546.45

Income (Loss) Before other revenues, expenses, gains or losses

(1,243,763.76)

Other revenues, expenses, gains or losses

2,035,305.11

Increase in Net Assets

791,541.35

Net Assets at beginning of year, as originally reported C umulative effect of changes in accounting principle Prior Year Adjustments Net Assets at beginning of year, restated

16,564,289.57
1,622,814.56 18,187,104.13

Net Assets at End of Year

$18,978,645.48

June 30, 2002 $16,429,333.51
31,873,249.35 (15,443,915.84) 14,701,667.17
(742,248.67)
(742,248.67) 49,442,393.43 32,135,855.19 17,306,538.24 $16,564,289.57

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:
Annual Financial Report FY 2003 (Version 1.0) 3

Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

Operating Revenue Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Auxiliary Other
Total Operating Revenue
Nonoperating Revenue State Appropriations Gifts Investment Income Grants and Contracts Other
Total Nonoperating Revenue
Capital Gifts and Grants State Capital Appropriations Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

June 30, 2003

June 30, 2002

$4,329,484.15 6,012,838.17 1,414,504.66 3,958,320.88 203,843.68
15,918,991.54

$4,352,170.68 6,465,043.39 1,505,099.72 3,938,444.25 168,575.47
16,429,333.51

13,217,457.35 55,089.10

14,642,722.00 58,945.17

13,272,546.45

14,701,667.17

2,035,305.11

2,035,305.11 $31,226,843.10

0.00 $31,131,000.68

Annual Financial Report FY 2003 (Version 1.0) 4

Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003
$10,639,180.70 307,858.42
1,564,402.09 2,454,121.86 1,997,103.72 4,202,857.16 3,514,870.07 1,871,160.87 3,883,746.86
30,435,301.75
$30,435,301.75

June 30, 2002
$10,952,515.59 319,613.56
1,500,797.96 2,092,116.70 1,942,053.65 4,014,140.93 5,296,055.45 1,674,271.78 4,081,683.73
31,873,249.35
$31,873,249.35

The decrease in Federal Funds is due to fact we got a large Federal Grant in FY 2002 in amount of $ 681,873. This project was completed last year
The compensation and employee benefits category increased by approximately $109,661.49. The increase reflects a pay raise for the employees of the institution of approximately three percent with the associated fringe benefits. The increase also reflects an increased cost of health insurance for the employees of the institution.
Under non-operating revenues (expenses) state appropriations decreased by approximately ($1,425,264.65). Approximately one-half of the decrease is attributable to the fact MRRF funds are not accounted for in our books but are handled directly at Central Office.
Statement of Cash Flows
The final statement presented by the Georgia Southwestern State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing
Annual Financial Report FY 2003 (Version 1.0) 5

activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Year Ended June 30, 2003, condensed

Cash Provided (used) By: Operating Activities Non-capital Financing Activities Investing Activities Capital and Related Financing Activities
Net Change in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2003
($13,948,844.48) 13,629,880.32 46,729.98 (356,765.67)
(628,999.85) 3,132,583.10
$2,503,583.25

Capital Assets

The University had one significant capital asset addition for facilities in fiscal year 2003. The Crawford Wheatley Hall Building renovation was completed and will reopen for the 2003- 2004 academic year. This projected was funded by GSFIC in the amount of $ 2,035,305.11.

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Economic Outlook

The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong. Even with a relatively flat funded year, the University was able to generate a modest increase in Net Assets. The University anticipates the current fiscal year will be much like last year. Resources, expenditures and revenues will be closely monitored to maintain the University's ability to react to unknown internal and external issues.

________________________ Dr. Michael Hanes, President Georgia Southwestern State University

Annual Financial Report FY 2003 (Version 1.0) 6

Statement of Net Assets

G e o rg ia S o u th w e s te rn S ta te U n iv e rs ity

STA TE M E NT O F NE T A SSE TS

June 30, 2003

June 30, 2003

ASSETS

Curre nt A sse ts

C a s h a n d C a s h E q u iv a le n ts

$ 2 ,5 0 3 ,5 8 3 .2 5

S h o rt-te rm In v e s tm e n ts

A c c o u n ts R e c e iv a b le , n e t

8 9 7 ,2 8 7 .6 9

In v e n to rie s

4 5 8 ,6 4 0 .2 7

O th e r A s s e ts

1 0 8 ,4 5 6 .8 8

T o ta l C u rre n t A s s e ts

3 ,9 6 7 ,9 6 8 .0 9

No nc urre nt A s se ts Noncurrent C ash In v e s tm e n ts N o te s R e c e iv a b le , n e t C a p ita l A s s e ts , n e t T o ta l N o n c u rre n t A s s e ts TOTAL ASSETS

6 1 1 ,0 0 2 .2 3 7 5 8 ,4 2 7 .6 6 1 7 ,2 0 3 ,1 6 0 .1 2 1 8 ,5 7 2 ,5 9 0 .0 1 2 2 ,5 4 0 ,5 5 8 .1 0

LIA BILITIES Curre nt Lia b ilitie s
A c c o u n ts P a y a b le a n d A c c ru e d Lia b ilitie s D e p o s its D e fe rre d R e v e nue O th e r Lia b ilitie s D e p o s its H e ld fo r O th e r O rg a n iz a tio n s C o m p e n s a te d A b s e n c e s (c u rre n t p o rtio n )
T o ta l C u rre n t Lia b ilitie s No nc urre nt Lia b ilitie s
C o m p e n s a te d A b s e n c e s Lo n g -te rm Lia b ilitie s
T o ta l N o n c u rre n t Lia b ilitie s T OTA L LIA BILITIES

2 1 4 ,7 3 1 .1 1 4 1 ,4 6 5 .0 0
1 ,6 0 5 ,5 5 3 .4 8 2 6 ,9 8 1 .0 8
8 6 9 ,9 5 7 .0 7 4 2 6 ,3 2 5 .1 2 3 ,1 8 5 ,0 1 2 .8 6
3 2 9 ,1 7 6 .3 9 4 7 ,7 2 3 .3 7
3 7 6 ,8 9 9 .7 6 3 ,5 6 1 ,9 1 2 .6 2

NET ASSETS In v e s te d in C a p ita l A s s e ts , n e t o f re la te d d e b t R e s tric te d fo r N o n e x p e n d a b le E x p e n d a b le C a p ita l P ro je c ts U n re s tric te d TOTAL NET ASSETS

1 7 ,2 0 3 ,1 6 0 .1 2 3 5 3 ,7 9 9 .5 8
1 ,4 2 1 ,6 8 5 .7 8 $ 1 8 ,9 7 8 ,6 4 5 .4 8

Annual Financial Report FY 2003 (Version 1.0) 7

Statement of Revenues, Expenses and Changes in Net Assets

Georgia Southwestern State University STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2003
June 30, 2003

RE VE NUE S

Operating Revenues

Student Tuition and Fees

$5,548,362.15

Less: Sponsored and Unsponsored Scholarships

(1,218,878.00)

Federal Appropriations

Federal Grants and C ontracts State and Local Grants and C ontracts Nongovernmental Grants and C ontracts

3,661,279.30 308,294.70
2,043,264.17

Sales and Services of Educational Departments

1,414,504.66

Auxiliary Enterprises

3,958,320.88

Other Operating Revenues

203,843.68

Total Operating Revenues

15,918,991.54

E XPE NS E S

Operating Expenses

Salaries:

Faculty S ta ff

6,097,740.25 7,822,675.67

Benefits Other Personal Services

4,054,442.23 1,752.00

Travel

238,322.15

Scholarships and Fellowships

2,299,844.61

Utilities

1,253,946.14

Supplies and Other Services D e pr e c ia tio n

7,645,627.28 1,020,951.42

Total Operating Expenses

30,435,301.75

Operating Income (loss) NONOPERATING REVENUES (EXPENSES)

(14,516,310.21)

State Appropriations

13,217,457.35

G ifts

Investment Income (endowments, auxiliary and other) Interest Expense (capital assets)

55,089.10

Other Nonoperating Revenues

Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss State C apital Appropriations

13,272,546.45 (1,243,763.76) 2,035,305.11

C apital Grants and Gifts

Federal Grants & C ontracts

State Grants & C ontracts

Other Grants and C ontracts

Total Other Revenues

2,035,305.11

Increase in Net Assets NET ASSETS

791,541.35

Net Assets-beginning of year, as originally reported

16,564,289.57

C umulative effect of changes in accounting principle

Prior Year Adjustments

1,622,814.56

Net Assets-beginning of year, restated

18,187,104.13

Net Assets-End of Year

$18,978,645.48

Annual Financial Report FY 2003 (Version 1.0) 8

Statement of Cash Flows
Georgia Southwestern State University STATEMENT OF CASH FLOWS
For the Year Ended June 30, 2003
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities
CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES C apital Grants and Gifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital Debt and Leases Interest Paid on C apital Debt and Leases Net C ash used by C apital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003
$5,147,689.29 5,521,638.83
1,427,989.58 (13,022,614.41) (14,132,248.20)
(3,293,156.20) (14,000.00) 53,938.85
1,144,253.10 998,425.49 750,278.02 88,339.34 301,721.58 646,681.27 28,622.08 403,596.90
(13,948,844.48)
13,217,457.35 412,422.97
13,629,880.32
(356,765.67)
(356,765.67)
46,729.98
46,729.98 (628,999.85) 3,132,583.10 $2,503,583.25

Annual Financial Report FY 2003 (Version 1.0) 9

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating Activities
Depreciation C hange in Assets and Liabilities:
Receivables, net Inventories Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($14,516,310.21)
1,020,951.42
(120,994.09) (117,441.89)
(11,896.43) 138,533.49 (431,375.82)
10,033.22 79,655.83
($13,948,844.48)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current Assets

$2,503,583.25 $2,503,583.25

Georgia Southwestern State University had no transactions to report under Non-Cash Investing, Non-Capital Financing, and Capital and Related-Financing Transactions.

Annual Financial Report FY 2003 (Version 1.0) 10

GEORGIA SOUTHWESTERN STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations Georgia Southwestern State University serves the state, and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity Georgia Southwestern State University is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Georgia Southwestern State University as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Georgia Southwestern State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Georgia Southwestern State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of
Annual Financial Report FY 2003 (Version 1.0) 11

materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
Basis of Accounting For financial reporting purposes, the University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-university transactions have been eliminated.
The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Annual Financial Report FY 2003 (Version 1.0) 12

Inventories Consumable supplies are recorded on the consumption method and are valued at cost, using the weighted average method. Resale inventories are valued at cost using the weighted average method.
Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia (and thus Georgia Southwestern State University) recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Georgia Southwestern State University when complete. For the year ended June 30, 2003, GSFIC transferred capital additions valued at $2,035,305.11 to Georgia Southwestern State University.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred
Annual Financial Report FY 2003 (Version 1.0) 13

revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Georgia Southwestern State University had accrued liability for compensated absences in the amount of $675,845.68 as of 7-1-2002. For FY2003, $456,718.84 was earned in compensated absences and employees were paid $377,063.01, for a net increase of $79,655.83. The ending balance as of 6-30-2003 in accrued liability for compensated absences is $ 755,501.51.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The University's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary
Annual Financial Report FY 2003 (Version 1.0) 14

enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted Total Unrestricted Net Assets

June 30, 2003
$1,115,742.44 426,635.39 450,668.59 (571,360.64)
$1,421,685.78

When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes Georgia Southwestern State University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues The University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.

Annual Financial Report FY 2003 (Version 1.0) 15

Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships.
Annual Financial Report FY 2003 (Version 1.0) 16

Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus Georgia Southwestern State University) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus Georgia Southwestern State University), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Annual Financial Report FY 2003 (Version 1.0) 17

Categorization of Deposits
The University's cash deposits are categorized by risk as follows:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the University or by its agent in the University's name.
Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University's name.
Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the University's name, and amounts uncollateralized.
Cash Deposits as of June 30, 2003

Cash Deposits Investment Portfolio Accounts
Total Cash Deposits

C arrying Amount
$663,105.57 33,863.78

Bank Balances
$1,362,419.52 0.00

$696,969.35 $1,362,419.52

Risk Categories

1

2

$300,000.00 $1,062,419.52

$300,000.00 $1,062,419.52

3 $0.00
$0.00

Categorization of Investments
The University's investments are categorized as to credit risk within the three categories described below:
Category 1 - Insured or registered, or securities held by the University or its agent in the University's name
Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name.
Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University's name.

Annual Financial Report FY 2003 (Version 1.0) 18

At June 30, 2003, the University's investments consisted of the following:

Type of Investm ents
C om m on S tock C orporate B onds S ecurities and C orporate O bligations

Risk C ategories

1

2

$0.00

$0.00

3 $0.00

C arrying Amount
$0.00 0.00 0.00

T o ta ls

$0.00

$0.00

$0.00

$0.00

Investm ents Not S ubject to C ategorizations: B oard of Regents
S hort-Term Fund Balanced Income Fund Total Return Fund Investm ent Portfolio A ccounts Mutual Funds R eal Estate S tate Inve stm ent Pool S hort-Term Investm ents
Total Investm ents

611,002.23 1,806,613.90 $2,417,616.13

Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool.

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2003.

S tud e nt T uitio n a nd Fe e s A ux ilia ry Ente rp rise s a nd O the r O p e ra ting A ctiv itie s Fe d e ra l, S ta te , a nd P riv a te Fund s O the r
Le ss A llo w a nce fo r D o ub tful A cco unts
Ne t A cco unts R e ce iv a b le

June 30, 2003
$320,424.81 123,481.44 217,313.94 265,186.33 926,406.52 29,118.83
$897,287.69

Annual Financial Report FY 2003 (Version 1.0) 19

Note 4. Inventories

Inventories consisted of the following at June 30, 2003.

B o o k s to re Fo o d S e rv ic e s P h y s ic a l P la n t O th e r
T o ta l

June 30, 2003 $ 3 8 1 ,1 6 8 .5 9
7 7 ,4 7 1 .6 8 $ 4 5 8 ,6 4 0 .2 7

Note 5. Notes/Loans Receivable
Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2003 and 2002. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The University has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2003, Georgia Southwestern State University had no allowance for uncollectible loans.

Annual Financial Report FY 2003 (Version 1.0) 20

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2003:

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$529,207.00
529,207.00

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

25,992,734.00 1,267,167.00 2,676,213.58
5,696,937.00
35,633,051.58

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

13,041,476.07 941,647.36
2,051,271.94
4,285,534.00
20,319,929.37

Total Capital Assets, Being Depreciated, Net 15,313,122.21

Capital Assets, net

$15,842,329.21

Additions $0.00 0.00

Reductions $0.00 0.00

Ending Balance 6/30/2003
$529,207.00 0.00
529,207.00

2,035,305.11 135,428.64 237,514.00
2,408,247.75

164,619.73 6,354.00
170,973.73

0.00 28,028,039.11
1,267,167.00 2,647,022.49
0.00 5,928,097.00
0.00 37,870,325.60

486,123.98 51,803.37
264,709.07
218,315.00
1,020,951.42
1,387,296.33
$1,387,296.33

(8,432.73) (15,419.71) 161,706.75
6,654.00
144,508.31

0.00 13,536,032.78
1,008,870.44 2,154,274.26
0.00 4,497,195.00
0.00 21,196,372.48

26,465.42

16,673,953.12

$26,465.42 $17,203,160.12

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2003.

P re pa id T uitio n a nd Fe e s Research O the r D e fe rre d R e v e nue
To ta ls

June 30, 2003 $1,100,406.29
505,147.19 $1,605,553.48

Annual Financial Report FY 2003 (Version 1.0) 21

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2003 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2002
$60,408.47

Additions $10,965.87

Reductions

Ending Balance June 30, 2003

$23,650.97

$47,723.37

Current Portion
$0.00

Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total

675,845.68 675,845.68

456,718.84 456,718.84

377,063.01 377,063.01

755,501.51 755,501.51

426,325.12 426,325.12

Total Long Term Obligations

$736,254.15 $467,684.71

$400,713.98 $803,224.88

$426,325.12

(a) The beginning balance includes the amount shown as current in FY2002 and reclassified as long-term in FY2003

Annual Financial Report FY 2003 (Version 1.0) 22

Note 9. Lease Obligations
Georgia Southwestern State University is obligated under various operating leases for the use of real property and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property.
Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2003, were as follows:
OPERATING LEASES

Year Ending June 30:

Year

2004

1

2005

2

2006 2007 2008 2009 through 2013 2014 through 2018

3 4 5 6-10 11-15

2019through 2023

16-20

2024 through 2028

21-25

2029 through 2033

26-30

2034 through 2038

31-35

2039 through 2043

36-40

Total minimum lease payments

Less: Interest

Less: Executory costs (if paid)

Principal Outstanding

Real Property

C apital Leases

Operating Leases

$0.00

$22,334.76 13,307.64 9,046.68 1,733.88 1,300.41

0.00 $0.00

$47,723.37

Georgia Southwestern State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2004 through 2008. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment.

Annual Financial Report FY 2003 (Version 1.0) 23

Note 10. Retirement Plans

Teachers Retirement System Of Georgia

Plan Description Georgia Southwestern State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Georgia Southwestern State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Georgia Southwestern State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$ 774,092.97 $ 784,154.40 $ 913,781.15

Regents Retirement Plan

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.

Funding Policy Georgia Southwestern State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation.

Annual Financial Report FY 2003 (Version 1.0) 24

Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.
Georgia Southwestern State University and the covered employees made the required contributions of $412,528.64 (10.02%) and $205,852.25 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description Georgia Southwestern State University participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $ 23,527.91 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
Georgia Southwestern State University is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Georgia Southwestern State University and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per
Annual Financial Report FY 2003 (Version 1.0) 25

person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Georgia Southwestern State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Georgia Southwestern State University expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Georgia Southwestern State University (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
Note 13. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University
Annual Financial Report FY 2003 (Version 1.0) 26

System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 132 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, Georgia Southwestern State University recognized as incurred $417,648.99 of expenditures, which was net of $134,105.00 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 27

Note 14. Natural Classifications With Functional Classifications

The University's operating expenses by functional classification for FY2003 are shown below:

Statement of Operating Expenses - Natural vs Func tional Classific ations For the Fisc al Year Ended June 30, 2003
Functional Classification FY 2003

Natural C lassification

Instruction

Research

Public Service

Academic Support

Student Services

Faculty Staff B enefits P erso nal Services Travel Scho larships and Fello wships Utilities Supplies and Others Services Depreciatio n

$ 5,931,563.65 1,119,564.66 1,739,170.43
68,053.47 26,054.00 69,882.91 1,684,891.58

$ 42,324.50 66,965.24 11,750.48
2,495.86
1,267.48 183,054.86

$ 20,889.76 708,048.94 156,224.08
50,127.76 70,370.23 12,758.60 544,427.12
1,555.60

$ 87,748.95 1,387,456.94
344,331.50
32,502.14
40,002.71 333,846.28 228,233.34

$ 210.00 1,181,285.21 279,082.58
47,525.28 37,000.51 21,246.15 430,753.99

To tal Expenses

$ 10,639,180.70

$ 307,858.42

$ 1,564,402.09

$ 2,454,121.86

$ 1,997,103.72

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003

Natural Classification

Inst it ut io nal Suppo rt

P lant Operat io ns & M aintenance

Functional Classification FY2003

Scho larships & Fellowships

A uxiliary Enterprises

Unallo cat ed Expenses

Faculty Staff B enefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciat io n

$ 1,500.00 2,105,011.59 1,193,889.32
1,752.00 26,604.56
3,369.19 33,589.72 821,853.16 15,287.62

$ 0.00 700,068.84 193,448.94 (268,055.30)
2,818.65
997,793.27 1,283,757.76
605,037.91

$ 0.00
1,871,119.97 40.90

$ 13,503.39 554,274.25 136,544.90 268,055.30
8,194.43 291,930.71 77,405.30 2,363,001.63 170,836.95

$ 0.00

Total Expenses

$ 4,202,857.16

$ 3,514,870.07

$ 1,871,160.87

$ 3,883,746.86

$ 0.00

To t al Expenses
$ 6,097,740.25 7,822,675.67 4,054,442.23 1,752.00 238,322.15 2,299,844.61 1,253,946.14 7,645,627.28 1,020,951.42
$ 30,435,301.75

Annual Financial Report FY 2003 (Version 1.0) 28

KENNESAW STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2003

Betty L. Siegel
President

Kennesaw State University Kennesaw, Georgia
B. Earle Holley
Vice President for Business and Finance

KENNESAW STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2003
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 7 Statement of Revenues, Expenses and Changes in Net Assets............................................ 8 Statement of Cash Flows ..................................................................................................... 9 Note 1 Summary of Significant Accounting Policies ...................................................... 11 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 16 Note 3 Accounts Receivable............................................................................................. 18 Note 4 Inventories............................................................................................................. 19 Note 5 Notes/Loans Receivable........................................................................................ 19 Note 6 Capital Assets........................................................................................................ 20 Note 7 Deferred Revenue.................................................................................................. 21 Note 8 Long-Term Liabilities ........................................................................................... 21 Note 9 Lease Obligations.................................................................................................. 22 Note 10 Retirement Plans ................................................................................................. 23 Note 11 Risk Management................................................................................................ 24 Note 12 Contingencies...................................................................................................... 25 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 25 Note 14 Natural Classifications With Functional Classifications..................................... 27

KENNESAW STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Kennesaw State University is one of the 34 institutions of the University System of Georgia. The University, located in Kennesaw, Georgia, was founded in 1963 and is recognized as a highly valued resource for the region's educational, economic, social, and cultural advancement. The University offers baccalaureate and masters degrees in a wide variety of subjects. This wide range of educational opportunities attracts a highly qualified faculty and a growing student body as shown by the comparison numbers that follow.

Faculty

Students

FY2003 FY2002 FY2001

409

15,654

389

13,951

375

13,373

Overview of the Financial Statements and Financial Analysis

Kennesaw State University is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2002 and FY 2003.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Kennesaw State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements.

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is
Annual Financial Report FY 2003 (Version 1.0) 1

restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

A sse ts: C urrent A ssets C apital A ssets, net O the r A ssets Total A ssets

June 30, 2003
$42,029,015.03 96,421,090.53 1,207,985.00
139,658,090.56

June 30, 2002
$36,150,377.89 75,860,806.49 1,205,456.36
113,216,640.74

Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities

29,195,594.16 21,323,622.02 50,519,216.18

22,196,240.49 1,524,715.02
23,720,955.51

Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets

75,967,477.39 774,990.24 1,485.12
12,394,921.63 $89,138,874.38

75,860,806.49 388,324.68 505,337.97
12,741,216.09 $89,495,685.23

The total assets of the institution increased by $26,441,449.82. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $20,560,284.04 of capital assets, net of accumulated depreciation which primarily consisted of a capital lease on the two parking structures added in 2003. See Note 1 in the notes to the financial statements for additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets. The remainder was primarily due to an increase of $7.1 million in accounts receivable, which is mainly attributable to student receivables and amounts due from the Kennesaw State University Foundation for the athletic facility construction.
The total liabilities for the year increased by $26,798,260.67. The primary cause for the increase was $20,453,613 in debt, which is related to the acquisition of the capital lease. The combination of the increase in total assets of $26,441,449.82 and the increase in total liabilities of $26,798,260.67 yields a decrease in total net assets of ($356,810.85). The decrease in total net assets is primarily in the category of unrestricted net assets of $346,294.46. The increase in investments in capital assets offset the decrease in restricted net assets.

Annual Financial Report FY 2003 (Version 1.0) 2

Statement of Revenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

Operating Revenues Operating Expenses Operating Loss
Nonoperating Revenues and Expenses

June 30, 2003
$64,120,616.38 123,570,980.22 (59,450,363.84)
58,333,502.14

June 30, 2002
$51,442,196.56 113,026,806.00 (61,584,609.44)
57,568,008.42

Incom e (Loss) B efore other revenues, expenses, gains or losses

(1,116,861.70)

(4,016,601.02)

Other revenues, expenses, gains or losses

970,021.00

4,390,000.00

Increase in Net Assets

(146,840.70)

373,398.98

Net Assets at beginning of year, as originally reported C um ulative effect of changes in accounting principle Prior Year Adjustm ents Net Assets at beginning of year, restated

89,495,685.23
(209,970.15) 89,285,715.08

152,316,301.19 (63,194,014.94)
89,122,286.25

Net Assets at End of Year

$89,138,874.38

$89,495,685.23

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a decrease in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:

Annual Financial Report FY 2003 (Version 1.0) 3

Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

Operating Revenue Tuition and Fees Grants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O th e r
Total Operating Revenue
Nonoperating Revenue State Appropriations G ifts Investment Incom e Grants and C ontracts O th e r
Total Nonoperating Revenue
C apital Gifts and G rants State C apital Appropriations Other C apital G ifts and Grants
Total C apital G ifts and G rants
Total Revenues

June 30, 2003

June 30, 2002

$34,276,483.95 11,703,012.96 5,223,917.32 12,109,827.57 807,374.58
64,120,616.38

$25,123,405.33 9,748,980.01 5,540,469.45
10,321,018.32 708,323.45
51,442,196.56

56,344,125.14 701,816.33
2,098,160.26 59,144,101.73

56,640,141.00 851,804.63 76,062.79
57,568,008.42

970,021.00 970,021.00 $124,234,739.11

4,390,000.00
4,390,000.00 $113,400,204.98

Annual Financial Report FY 2003 (Version 1.0) 4

Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003
$53,149,024.93
6,739,114.49 13,478,677.24
7,536,092.48 17,034,043.12 11,918,815.96
3,327,888.06 11,113,959.56
(726,635.62)
123,570,980.22
810,599.59
$124,381,579.81

June 30, 2002 $48,822,616.68
4,610,023.58 13,824,525.78
7,543,262.41 16,459,094.27
7,698,665.19 5,544,347.24 8,524,270.85
113,026,806.00
$113,026,806.00

Total revenues increased approximately $10.8 million in spite of the fact that Kennesaw State University did not receive any capital appropriations compared with $4.4 million last fiscal year. Operating revenue increased about $12.7 million, mostly in tuition and fees, due to the increase in the student population. Grants and Contracts and Auxiliary contributed approximately $2.0 million and $1.8 million in additional revenue, respectively.
Non-Operating revenue increased approximately $1.6 million despite a decline in state appropriations primarily due to a $2.0 million dollar gift for the Athletic Facility construction.
The compensation and employee benefits category increased by approximately $6,813,728.29. The increase reflects a pay raise for the employees of the institution of approximately four and a half percent, the hiring of an additional 25 faculty, and the associated fringe benefits. The increase also reflects an increased cost of health insurance for the employees of the institution.
Supplies and Other Services increased by approximately $4.4 Million during the past year. The increase was primarily associated with the purchase of non-inventory equipment.
Under Non-operating Expenses, $810,599.59 was paid in interest on the capital lease.
Statement of Cash Flows
The final statement presented by the Kennesaw State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with
Annual Financial Report FY 2003 (Version 1.0) 5

operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Years Ended June 30, 2003, Condensed

C ash Provided (used) By: Operating A ctivities Non-capital Financing Activities Investing Activities C apital and Related Financing A ctivities
Net C hange in C ash C ash, Beginning of Year
C ash, End of Year

June 30, 2003
($ 5 3 ,4 6 7 ,0 9 5 .8 9 ) 5 6 ,6 1 5 ,0 4 8 .4 8 6 5 9 ,4 0 2 .6 6 (5 ,7 2 8 ,5 2 9 .6 6 )
(1 ,9 2 1 ,1 7 4 .4 1 ) 1 6 ,6 1 6 ,5 5 2 .7 5
$ 1 4 ,6 9 5 ,3 7 8 .3 4

Capital Assets
The University had one significant capital asset addition fiscal year 2003. Two parking structures were added under a capital lease.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Economic Outlook
The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong. Even with a relatively flat funded year, the University was able to generate a modest increase in Net Assets. The University anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues.
_______________________ Betty L. Siegel, President Kennesaw State University

Annual Financial Report FY 2003 (Version 1.0) 6

Statement of Net Assets

KENNESAW STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2003
ASSETS Current Assets C ash and C ash Equivalents S hort-term Investm ents A ccounts Receivable, net I n v e n to r ie s Othe r A ssets Total C urrent A ssets

June 30, 2003
$14,695,378.34 3,860,896.53
21,661,037.92 965,080.06 846,622.18
42,029,015.03

Noncurrent Assets Noncurrent C ash Investm ents Notes Receivable, net C apital A ssets, net Total Noncurrent A ssets TOTAL ASSETS

774,990.24 432,994.76 96,421,090.53 97,629,075.53 139,658,090.56

LIA BILIT IE S Current Liabilities
A ccounts Payable and A ccrued Liabilities D eposits Deferred Revenue Othe r Liabilities D eposits He ld for Other Organizations C om pensated A bsences (current portion)
Total C urrent Liabilities Noncurrent Liabilities
C om pensated A bsences Long-term Liabilities
Total Noncurrent Liabilities TOTAL LIABILITIES

1,408,182.70
23,290,337.98 546,324.68
2,164,969.84 1,785,778.96 29,195,594.16
1,416,333.56 19,907,288.46 21,323,622.02 50,519,216.18

NET ASSETS Invested in C apital A ssets, net of related debt Restricted for No ne x p e nd a b le Ex p e nd a b le C apital Projects U n r e s tr ic te d TOTAL NET ASSETS

75,967,477.39
774,990.24 1,485.12
12,394,921.63 $89,138,874.38

Annual Financial Report FY 2003 (Version 1.0) 7

Statement of Revenues, Expenses and Changes in Net Assets

KENNESAW STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2003
June 30, 2003

REVENUES

Operating Revenues

Student Tuition and Fees

$37,597,727.44

Less: Sponsored and Unsponsored Scholarships

(3,321,243.49)

Federal Appropriations

Federal Grants and Contracts

8,422,759.48

State and Local Grants and Contracts

2,397,387.31

Nongovernmental Grants and Contracts

882,866.17

Sales and Services of Educational Departments

5,223,917.32

Auxiliary Enterprises

12,109,827.57

Other Operating Revenues

807,374.58

Total Operating Revenues

64,120,616.38

EXPENSES

Operating Expenses

Salaries:

Faculty Staff

31,432,946.07 35,230,839.95

Benefits Other Personal Services

15,067,864.18

Travel

1,269,912.04

Scholarships and Fellowships

4,258,082.79

Utilities

2,375,133.97

Supplies and Other Services Depreciation

29,286,290.35 4,649,910.87

Total Operating Expenses

123,570,980.22

Operating Income (loss) NONOPERATING REVENUES (EXPENSES)

(59,450,363.84)

State Appropriations

56,344,125.14

Gifts

Investment Income (endowments, auxiliary and other) Interest Expense (capital assets)

701,816.33 (810,599.59)

Other Nonoperating Revenues

2,098,160.26

Net Nonoperating Revenues

58,333,502.14

Income before other revenues, expenses, gains, or loss

(1,116,861.70)

State Capital Appropriations

Capital Grants and Gifts

970,021.00

Federal Grants & Contracts

State Grants & Contracts

Other Grants and Contracts

Total Other Revenues

970,021.00

Increase in Net Assets NET ASSETS

(146,840.70)

Net Assets-beginning of year, as originally reported

89,495,685.23

Cumulative effect of changes in accounting principle

Prior Year Adjustments

(209,970.15)

Net Assets-beginning of year, restated

89,285,715.08

Net Assets-End of Year

$89,138,874.38

Annual Financial Report FY 2003 (Version 1.0) 8

Statement of Cash Flows
KENNESAW STATE UNIVERSITY STATEMENT OF C ASH FLOWS
For the Year Ended June 30, 2003
CASH F LOWS F ROM OPE RATING A CTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales and Services of Educational D epartments Paym ents to Suppliers Paym ents to Em ployees Paym ents for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Em ployees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics V e n d ing Other Receipts (payments) Net C ash Provided (used) by Operating Activities
CASH F LOWS F ROM NON- CAPITA L F INANCING ACTIVIT IE S State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing A ctivities
CASH F LOWS F ROM CAPIT AL AND RELATED F INA NCING A CTIVITIES C apital Grants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities
CASH F LOWS F ROM INVESTING ACT IVITIES Proceeds from Sales and Maturities of Investments Interest on Investm ents Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003
$34,578,496.96
10,830,825.41 5,238,307.82
(47,949,794.97) (66,634,115.84)
(4,244,389.54) (734,264.56) 724,664.34
6,199,939.61 605,046.03
2,404,826.14 333,353.40
2,371,067.12 62,251.52
2,746,690.67 (53,467,095.89)
56,174,194.89 (1,673,159.07) 2,114,012.66 56,615,048.48
5,902.46
(4,239,772.31) (608,116.90) (886,542.91)
(5,728,529.66)
659,402.66
659,402.66 (1,921,174.41) 16,616,552.75 $14,695,378.34

Annual Financial Report FY 2003 (Version 1.0) 9

Statement of Cash Flows, Continued
RECONCILIA TION OF OPERA TING LOSS TO NET CA SH PROVIDE D (USED) BY OPERATING A CTIVITIES:
Operating Incom e (loss) A djustments to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating Activities
D epreciation C hange in Assets and Liabilities:
Receivables, net I n v e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($59,450,363.84)
4,649,910.87
(4,748,561.90) 21,422.26 (8,942.15) (94,162.56)
6,182,451.00 (13,387.78) (5,461.79)
($53,467,095.89)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current A ssets

$14,695,378.34 0.00
$14,695,378.34

** NON-C ASH INVESTING, NON-C APITAL FINANC ING, AND C APITAL AND RELATED FINANC ING TRANSAC TIONS

Fixed assets acquired by incurring capital lease obligations

$21,016,937.00

Annual Financial Report FY 2003 (Version 1.0) 10

KENNESAW STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations Kennesaw State University serves the state, and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity Kennesaw State University is one of thirty-four State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Kennesaw State University as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Kennesaw State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Kennesaw State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of
Annual Financial Report FY 2003 (Version 1.0) 11

materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
Basis of Accounting For financial reporting purposes, the University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-university transactions have been eliminated.
The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Consumable supplies are carried at the lower of cost or market on either the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis.
Annual Financial Report FY 2003 (Version 1.0) 12

Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Kennesaw State University when complete.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Kennesaw State University had accrued liability for
Annual Financial Report FY 2003 (Version 1.0) 13

compensated absences in the amount of $3,207,574.31 as of 7-1-2002. For FY2003, $2,427,748.00 was earned in compensated absences and employees were paid $2,433,209.79 for a net decrease of $5,461.79. The ending balance as of 6-30-2003 in accrued liability for compensated absences is $3,202,112.52.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The University's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.
Annual Financial Report FY 2003 (Version 1.0) 14

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Reserve Reserve for Encumbrances Reserve for Inventory O ther Unrestricted Total Unre stricted Net A ssets

June 30, 2003
$2,805,105.57 887,083.33 794,330.13
7,908,402.60 $12,394,921.63

When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes Kennesaw State University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues The University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships.

Annual Financial Report FY 2003 (Version 1.0) 15

Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus Kennesaw State University) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus Kennesaw State University), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Annual Financial Report FY 2003 (Version 1.0) 16

Categorization of Deposits
The University's cash deposits are categorized by risk as follows:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the University or by its agent in the University's name.
Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University's name.
Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the University's name, and amounts uncollateralized.
Cash Deposits as of June 30, 2003

C ash Deposits Investment Portfolio Accounts
Total C ash Deposits

C arrying Amount
$14,600,378.34

Bank Balances
$20,559,362.33

Risk C ategories

1

2

3

$100,000.00

$0.00 $20,459,362.33

$14,600,378.34

$20,559,362.33 $100,000.00

$0.00 $20,459,362.33

Categorization of Investments
The University's investments are categorized as to credit risk within the three categories described below:
Category 1 - Insured or registered, or securities held by the University or its agent in the University's name
Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name.
Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University's name.

Annual Financial Report FY 2003 (Version 1.0) 17

At June 30, 2003, the University's investments consisted of the following:

Type of Investm ents
C om m on S tock C orporate B onds S ecurities and C orporate O bligations

Risk C ategories

1

2

$0.00

$0.00

3 $0.00
692,408.38

T o ta ls

$0.00

$0.00

$692,408.38

C arrying Amount
$0.00 0.00
692,408.38
$692,408.38

Investm ents Not S ubject to C ate gorizations: B oard of R egents
S hort-Term Fund Legal Fund Balanced Income Fund Total Return Fund Investm ent Portfolio A ccounts Mutual Funds R eal Estate S tate Investm ent Pool S hort-Term Investm ents
Total Investm ents

2,742,461.21 1,118,435.32
82,581.84
$4,635,886.75

Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool.

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2003.

S tudent Tuition and Fees A uxiliary Enterprises and Other Operating A ctivities Fede ral, S tate, and Private Funds O the r
Less A llowance for D oubtful A ccounts
Net A ccounts Receivable

June 30, 2003
$12,348,617.92 1,993,714.70 1,991,537.27 5,509,701.29
21,843,571.18 182,533.26
$21,661,037.92

Annual Financial Report FY 2003 (Version 1.0) 18

Note 4. Inventories

Inventories consisted of the following at June 30, 2003.

B ookstore Food Services Physical Plant O ther
T o ta l

June 30, 2003 $965,080.06
$965,080.06

Note 5. Notes/Loans Receivable
Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2003 and 2002. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education.

Annual Financial Report FY 2003 (Version 1.0) 19

Note 6. Capital Assets Following are the changes in capital assets for the years ended June 30, 2003.

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$3,302,820.87
3,302,820.87

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

1,819,221.00 83,400,484.66
2,022,385.00 9,600,928.65
15,566,486.09 616,400.00
113,025,905.40

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

830,777.59 20,573,869.04
1,657,428.62 6,690,989.31
10,450,815.00 264,040.22
40,467,919.78

Total Capital Assets, Being Depreciated, Net 72,557,985.62

Capital Assets, net

$75,860,806.49

Additions
$0.00 2,440,326.87 2,440,326.87
526,112.00
612,642.75 21,016,937.82
784,142.04
22,939,834.61
(17,585.70) 667,196.01 (71,929.26) 2,377,655.36 700,564.59 1,049,763.30
13,868.99 4,719,533.29
18,220,301.32
$20,660,628.19

Reductions $0.00 0.00

Ending Balance 6/30/2003
$3,302,820.87 2,440,326.87 5,743,147.74

81,572.21 41,879.14 123,451.35

1,819,221.00 83,926,596.66
2,022,385.00 10,131,999.19 21,016,937.82 16,308,748.99
616,400.00 135,842,288.66

16,937.20 6,170.00
23,107.20 100,344.15 $100,344.15

813,191.89 21,241,065.05
1,585,499.36 9,051,707.47
700,564.59 11,494,408.30
277,909.21 45,164,345.87
90,677,942.79
$96,421,090.53

Annual Financial Report FY 2003 (Version 1.0) 20

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2003.

Prepaid Tuition and Fees Research O ther D eferred Revenue
T o ta ls

June 30, 2003 $19,325,243.37
3,965,094.61 $23,290,337.98

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2003 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2002

Additions

$0.00 $21,016,937.82

Reductions

Ending Balance June 30, 2003

$563,324.68 $20,453,613.14

Current Portion
$546,324.68

Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total

3,207,574.31 3,207,574.31

2,427,748.00 2,427,748.00

2,433,209.79 2,433,209.79

3,202,112.52 0.00
3,202,112.52

1,785,778.96 1,785,778.96

Total Long Term Obligations

$3,207,574.31 $23,444,685.82 $2,996,534.47 $23,655,725.66 $2,332,103.64

(a) The beginning balance includes the amount shown as current in FY2002 and reclassified as long-term in FY2003.

Annual Financial Report FY 2003 (Version 1.0) 21

Note 9. Lease Obligations Kennesaw State University is obligated under a capital lease for the use of real property. Future commitments for the capital lease as of June 30, 2003, were as follows:

Year Ending June 30:

Year

2004

1

2005

2

2006

3

2007

4

2008

5

2009 through 2011

6-10

2012 through 2018

11-15

2019 through 2023

16-20

2024 through 2028

21-25

2029 through 2033

26-30

2034 through 2038

31-35

2039 through 2043

36-40

Total m inim um lease paym ents

Less: Interest

Less: Executory costs (if paid)

Principal O utstanding

Real Property

C apital Leases

Operating Leases

$1,495,903.82 1,491,110.63 1,489,905.83 1,483,004.48 1,479,622.31 7,348,606.41 7,207,307.51 7,047,191.28 4,247,267.94

33,289,920.21 12,836,307.07
$20,453,613.14

$0.00

CAPITAL LEASES
The capital leases is payable in monthly installments and expires in 2027. Expenditures for fiscal year 2003 were $1,373,924.25 of which $810,599.57 represented interest. Total principal paid on capital leases was $563,324.68 for the fiscal year ended June 30, 2003. The interest rate on the underlying debt was 4.7 percent.
OPERATING LEASES
Kennesaw State University had no operating leases.

Annual Financial Report FY 2003 (Version 1.0) 22

Note 10. Retirement Plans

Teachers Retirement System Of Georgia

Plan Description Kennesaw State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Kennesaw State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Kennesaw State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$ 3,182,344.59 $ 3,173,892.98 $ 3,912,925.67

Regents Retirement Plan

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.

Funding Policy Kennesaw State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statue and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation. Employees

Annual Financial Report FY 2003 (Version 1.0) 23

contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.
Kennesaw State University and the covered employees made the required contributions of $2,088,506.16 (10.02%) and $1, 043,762.94 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description Kennesaw State University participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $396,410.48 which represents 7.5 % of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
Kennesaw State University is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Kennesaw State University and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue
Annual Financial Report FY 2003 (Version 1.0) 24

Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Kennesaw State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Kennesaw State University expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Kennesaw State University (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
Note 13. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University
Annual Financial Report FY 2003 (Version 1.0) 25

System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 156 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, Kennesaw State University recognized as incurred $559,491.73 of expenditures, which was net of $196,975.08 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 26

Note 14. Natural Classifications With Functional Classifications The University's operating expenses by functional classification for FY2003 are shown below:

St at ement of Operat ing Expenses - Nat ural vs F unc t ional Classific at ions F or t he F isc al Y ear Ended June 30, 2003
F unc t ional Classific at ion FY 2003

Natural C lassification

Instruction Research

P u b lic S e r v ic e

Academ ic Support

F aculty Staff B enefits P erso nal Serv ices T rav el Sc ho lars hips and F ello ws hips Ut ilit ie s Supplies and Others Services D epreciatio n

$ 29,556,658.20 6,817,689.69 7,478,199.09
506,259.55 152,640.38 338,933.86 6,310,044.63 1,988,599.53

$ 0.00

$ 868,678.85 2,302,020.06
585,756.78
140,010.50 20,675.00 42,432.25 2,576,622.73 202,918.32

$ 927,899.98 7,228,760.97 1,696,952.43
161,449.26 3,432.01
155,267.53 2,736,743.77
568,171.29

T o tal Expens es

$ 53,149,024.93

$ 0.00

$ 6,739,114.49

$ 13,478,677.24

S tudent S e r v ic e s
$ 570.00 4,834,656.74 1,068,556.63
117,606.62 1,258.80
114,755.22 1,114,602.83 284,085.64
$ 7,536,092.48

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003

Natural Classification

Inst itut io nal Suppo rt

P lant Operat io ns & M aintenance

Functional Classification FY2003

Scho larships & Fellowships

A uxiliary Enterprises

Faculty Staff B enef it s Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciatio n

$ 1,082.00 9,123,335.41 3,072,829.19
105,903.94
150,778.96 3,890,191.33 689,922.29

$ 0.00 3,348,928.04
835,163.55 (83,681.84)
4,266.59
1,533,499.82 5,983,362.62
297,277.18

$ 0.00 3,327,888.06

$ 78,057.04 1,575,449.04
327,218.43 83,681.84
234,415.58 752,188.54 39,466.33 7,404,546.14 618,936.62

Total Expenses

$ 17,034,043.12

$ 11,918,815.96

$ 3,327,888.06

$ 11,113,959.56

Unallo c at ed Expenses

To t al Expenses

$ 0.00 3,188.08
(729,823.70)

$ 31,432,946.07 35,230,839.95 15,067,864.18
0.00 1,269,912.04 4,258,082.79 2,375,133.97 29,286,290.35 4,649,910.87

($ 726,635.62)

$ 123,570,980.22

Annual Financial Report FY 2003 (Version 1.0) 27

MACON STATE COLLEGE
Financial Report
For the Year Ended June 30, 2003

Macon State College Macon, Georgia

David A. Bell, PhD.
President

Levy G. Youmans, Jr.
Vice President for Fiscal Affairs

Annual Financial Report FY 2003 (Version 1.0)

MACON STATE COLLEGE ANNUAL FINANCIAL REPORT
FY 2003 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 8 Statement of Revenues, Expenses and Changes in Net Assets............................................ 9 Statement of Cash Flows ................................................................................................... 10 Note 1 Summary of Significant Accounting Policies ...................................................... 12 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 17 Note 3 Accounts Receivable............................................................................................. 19 Note 4 Inventories............................................................................................................. 20 Note 5 Notes/Loans Receivable........................................................................................ 20 Note 6 Capital Assets........................................................................................................ 21 Note 7 Deferred Revenue.................................................................................................. 22 Note 8 Long-Term Liabilities ........................................................................................... 22 Note 9 Lease Obligations.................................................................................................. 22 Note 10 Retirement Plans ................................................................................................. 23 Note 11 Risk Management................................................................................................ 24 Note 12 Contingencies...................................................................................................... 25 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 25 Note 14 Natural Classifications With Functional Classifications..................................... 27
Annual Financial Report FY 2003 (Version 1.0)

MACON STATE COLLEGE
Management's Discussion and Analysis

Introduction

Macon State College is one of 34 institutions in the University System of Georgia. Since its inception, the College has grown and expanded in many areas. Initially offering two-year transfer programs, career programs, and one-year certificates, the College received approval from the Board of Regents in October 1996 to begin offering baccalaureate programs in Information Technology, Health Services Administration, and Health Information Management. With the addition of baccalaureate programs in Business and Information Technology in 1998, Communications and Information Technology in 1999, and in Public Services-Human Services in 2001, the College has further expanded its levels of programming and service to the region.

The College's main campus, located in Macon, Georgia, is complemented by a new permanent campus just completed in Warner Robins, Georgia. Enrollment at the College has increased 49% since the mission change in 1996. Enrollment for Fall 2003 continued to increase with a total enrollment of over 5,400 students. The continued emphases on its focused mission and its professionally oriented baccalaureate degrees has positioned the College to continue as a major economic driver in the Central Georgia region. The institution continues to grow as shown by the comparison numbers that follow.

Faculty

Students

FY2003 FY2002 FY2001

159

5,441

118

4,989

105

4,115

Overview of the Financial Statements and Financial Analysis

Macon State College is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2002 and FY 2003.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Macon State College. The Statement of Net Assets presents end-of-year data
Annual Financial Report FY 2003 (Version 1.0) 1

concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements.

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine the financial liabilities of the institution.

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

Assets: C urrent Assets C apital Assets, net Other Assets Total Assets

June 30, 2003
$6,445,115.61 21,274,906.74
985,331.85 28,705,354.20

June 30, 2002
$5,848,673.12 20,848,504.90
932,887.62 27,630,065.64

Liabilities: C urrent Liabilities Noncurrent Liabilities Total Liabilities

4,190,186.51 356,243.29
4,546,429.80

3,788,154.61 3,788,154.61

Net Assets: Invested in C apital Assets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects Unrestricted Total Net Assets

21,274,906.74
73,449.96 53,430.60 2,757,137.10 $24,158,924.40

20,848,504.90
123,025.70
2,870,380.43 $23,841,911.03

The total assets of the institution increased by $1,075,288.56. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $426,401.84 in investment in plant, net of accumulated depreciation, and an increase in Accounts Receivable. See Note 1 in the notes to the financial statements for additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital
Annual Financial Report FY 2003 (Version 1.0) 2

assets. The increase in receivables consists of a $167,667 increase in Bookstore credit memorandums due to more timely return of books to the publishers. The remaining increase is due to receivables from the Georgia State Financing and Investment Commission (GSFIC) that resulted from four on-going GSFIC funded projects in which the College is required to pay contractors prior to requesting reimbursement from GSFIC. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution. The total liabilities for the year increased by $758,275.19. The primary cause for the increase was an increase in Deposits Held for Other Organizations. The combination of the increase in total assets of $1,075,288.56 and the increase in total liabilities of $758,275.19 yields an increase in total net assets of $317,013.37. The increase in total net assets is primarily in the category of invested in capital assets, net of debt. Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.
Annual Financial Report FY 2003 (Version 1.0) 3

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30, 2003

Operating Revenues Operating Expenses Operating Loss

$9,603,885.35 31,212,523.97 (21,608,638.62)

Nonoperating Revenues and Expenses

15,063,867.12

Income (Loss) Before other revenues, expenses, gains or losses

(6,544,771.50)

Other revenues, expenses, gains or losses

5,908,826.53

Increase in Net Assets

(635,944.97)

Net Assets at beginning of year, as originally reported Cumulative effect of changes in accounting principle Prior Year Adjustments Net Assets at beginning of year, restated

23,841,911.03
952,958.34 24,794,869.37

Net Assets at End of Year

$24,158,924.40

June 30, 2002 $12,650,869.40
27,125,468.11 (14,474,598.71) 15,076,639.36
602,040.65 904,628.44 1,506,669.09 43,661,757.09 (21,326,515.15) 22,335,241.94 $23,841,911.03

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:

Annual Financial Report FY 2003 (Version 1.0) 4

Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

Operating Revenue Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Auxiliary Other
Total Operating Revenue
Nonoperating Revenue State Appropriations Gifts Investment Income Grants and Contracts Other
Total Nonoperating Revenue
Capital Gifts and Grants State Capital Appropriations Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

June 30, 2003

June 30, 2002

$4,962,836.72 1,301,308.43 350,211.20 2,478,670.76 510,858.24
9,603,885.35

$4,652,382.48 5,061,567.41 366,985.51 2,276,008.00 293,926.00
12,650,869.40

15,014,794.60
53,867.52 5,908,826.53
(4,795.00)
20,972,693.65

14,974,300.00
102,321.59 904,628.44
17.77
15,981,267.80

0.00 $30,576,579.00

0.00 $28,632,137.20

Annual Financial Report FY 2003 (Version 1.0) 5

Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003
$13,600,996.67
342,301.06 2,320,613.18 2,279,556.80 3,432,326.73 2,893,635.84 2,959,077.84 2,391,808.72
992,207.13
31,212,523.97
$31,212,523.97

June 30, 2002 $13,210,709.10
344,367.88 2,265,557.46 2,090,695.49
348,176.76 2,631,663.56 4,247,009.66 1,987,288.20
27,125,468.11
$27,125,468.11

Total revenue increased by $1,944,442. The large majority of the increase was attributable to increases in tuition revenue and grants and contracts. The large decrease in Operating Revenue and the correspondingly large increase in Non-Operating Revenue is the result of a reclassification of several grants and contracts between the two categories from fiscal year 2002 to fiscal year 2003. Overall grants and contracts revenue increased $1,243,939 largely due to an increase in Federal Pell grant funds.
Tuition revenue rose $310,454.24 or 6.5% due to increases in headcount and semester hours. State Appropriations were relatively flat from fiscal year 2002 showing only a $40,495 increase.
The apparent increase in Institutional Support is due to a state audit adjustment and a reclassification of scholarship allowances in fiscal year 2002. Without the scholarship allowances adjustments, institutional support expenditures increased a modest $197,356.16.
Scholarship and fellowship expenditures increased $1,595,782.33 reflecting an increase in Federal Pell grant funds. The increase of $404,520.52 in Auxiliary Enterprises expenses resulted from increased cost of goods sold due to increased enrollment and the one-time costs associated with the main Bookstore remodeling project and the outfitting of the new Warner Robins Campus Bookstore. The remainder of the categories showed only modest increases or decreases.

Statement of Cash Flows

Annual Financial Report FY 2003 (Version 1.0) 6

The final statement presented by the Macon State College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Year Ended June 30, 2003, Condensed

Cash Provided (used) By: Operating Activities Non-capital Financing Activities Investing Activities Capital and Related Financing Activities
Net Change in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2003
($21,839,786.00) 20,711,985.40 50,997.58 (297,121.27)
(1,373,924.29) 3,420,526.95
$2,046,602.66

Economic Outlook
The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is strong. Even with the budget reductions mandated by the State Treasury and a modest increase in overall State funding for fiscal year 2003, the College was able to generate a modest increase in Net Assets. The College anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues.
_____________________________ David A. Bell, PhD., President Macon State College
Annual Financial Report FY 2003 (Version 1.0) 7

Statement of Net Assets
MAC O N STATE C O LLEGE STATEMENT OF NET ASSETS
June 30, 2003
ASSETS Current Asse ts C a sh a nd C a sh Equiv a le nts S ho rt-te rm Inv e stm e nts A cco unts R e ce iv a ble , ne t Inv e nto rie s O the r A sse ts To ta l C urre nt A sse ts
Noncurre nt Asse ts Noncurrent C ash Inv e stm e nts Note s R e ce iv a ble , ne t C a pita l A sse ts, ne t To ta l No ncurre nt A sse ts TOTAL ASSETS
LIA BILIT IE S Current Lia bilitie s A cco unts P a y a ble a nd A ccrue d Lia bilitie s D e po sits D eferred Revenue O the r Lia bilitie s D e po sits He ld for O the r O rga niza tio ns C o m pe nsa te d A bse nce s (curre nt po rtio n) To ta l C urre nt Lia bilitie s Noncurre nt Lia bilitie s C om pe nsa te d A bse nce s Long-te rm Lia bilitie s To ta l No ncurre nt Lia bilitie s TOTAL LIABILITIES
NET ASSETS Inv e ste d in C a pita l A sse ts, ne t o f re la te d de bt R e stricte d fo r Nonex pendable Ex pendable C a pita l P ro je cts Unre stricte d TOTAL NET ASSETS

June 30, 2003
$2,046,602.66 200,000.00
3,823,090.35 365,912.64 9,509.96
6,445,115.61
980,975.74 4,356.11
21,274,906.74 22,260,238.59 28,705,354.20
360,047.10
3,320,147.62 (74,513.31) 132,338.61 452,166.49
4,190,186.51
356,243.29
356,243.29 4,546,429.80
21,274,906.74
73,449.96 53,430.60 2,757,137.10 $24,158,924.40

Annual Financial Report FY 2003 (Version 1.0) 8

Statement of Revenues, Expenses and Changes in Net Assets

MACON STATE COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2003
June 30, 2003

REVENUES

Operating Revenues

Student Tuition and Fees

$7,195,967.58

Less: Sponsored and Unsponsored Scholarships

(2,233,130.86)

Federal Appropriations

Federal Grants and C ontracts State and Local Grants and C ontracts Nongovernmental Grants and C ontracts

831,985.38 469,323.05

Sales and Services of Educational Departments

350,211.20

Auxiliary Enterprises

2,478,670.76

Other Operating Revenues

510,858.24

Total Operating Revenues

9,603,885.35

EXPENSES

Operating Expenses

Salaries:

Faculty Staff

9,201,170.89 6,294,409.46

Benefits Other Personal Services

4,203,837.18

Travel

162,190.24

Scholarships and Fellowships

2,993,911.54

Utilities

776,491.46

Supplies and Other Services Depreciation

6,640,513.72 939,999.48

Total Operating Expenses

31,212,523.97

Operating Income (loss) NONOPERATING REVENUES (EXPENSES)

(21,608,638.62)

State Appropriations

15,014,794.60

Gifts

Investment Income (endowments, auxiliary and other) Interest Expense (capital assets)

53,867.52

Other Nonoperating Revenues

(4,795.00)

Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss State C apital Appropriations

15,063,867.12 (6,544,771.50)

C apital Grants and Gifts

Federal Grants & C ontracts

5,457,274.32

State Grants & C ontracts

169,389.00

Other Grants and C ontracts

282,163.21

Total Other Revenues

5,908,826.53

Increase in Net Assets NET ASSETS

(635,944.97)

Net Assets-beginning of year, as originally reported

23,841,911.03

C umulative effect of changes in accounting principle

Prior Year Adjustments

952,958.34

Net Assets-beginning of year, restated

24,794,869.37

Net Assets-End of Year

$24,158,924.40

Annual Financial Report FY 2003 (Version 1.0) 9

Statement of Cash Flows
MACON STATE COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2003
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities
CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES C apital Grants and Gifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital Debt and Leases Interest Paid on C apital Debt and Leases Net C ash used by C apital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003
$7,242,057.90
993,970.49 361,110.56 (11,842,937.41) (15,833,543.35) (5,225,455.70) (119,958.23) 121,425.95
2,510,225.46 (157,723.25)
9,479.98 101,561.60 (21,839,786.00)
15,014,794.60 (211,635.73)
5,908,826.53 20,711,985.40
(297,121.27)
(297,121.27)
(2,869.94) 53,867.52
50,997.58 (1,373,924.29) 3,420,526.95 $2,046,602.66

Annual Financial Report FY 2003 (Version 1.0) 10

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating Activities
Depreciation C hange in Assets and Liabilities:
Receivables, net Inventories Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($21,608,638.62)
939,999.80
(1,498,020.81) 9,479.98 (6,721.27)
(92,891.71) 315,584.24
11,975.78 89,446.61
($21,839,786.00)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current Assets

$2,046,602.66 $2,046,602.66

Macon State College had no transactions to report as "Non-Cash Investing, Non-Capital Financing, and Capital and Related Financing Transactions".

Annual Financial Report FY 2003 (Version 1.0) 11

MACON STATE COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations The purpose of Macon State College is to advance the intellectual, cultural, social, economic, recreational and physical development of those within commuting distance. The College's primary objective is to provide students the knowledge and skills needed for full constructive lives in a rapidly changing and increasingly global environment. The College is strongly committed to quality education and student success through excellence and innovation in teaching.
Reporting Entity Macon State College is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Macon State College as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Macon State College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Macon State College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the College is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Annual Financial Report FY 2003 (Version 1.0) 12

Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
Basis of Accounting For financial reporting purposes, the College is considered a special-purpose government engaged only in business-type activities. Accordingly, the College's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-college transactions have been eliminated.
The College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The College accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Annual Financial Report FY 2003 (Version 1.0) 13

Inventories Resale Inventories are valued at cost using the average-cost basis.
Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the College's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Macon State College when complete. For the year ended June 30, 2003, GSFIC did not transfer any capital additions to Macon State College.
Deposits The College held no student deposits at June 20, 2003.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Annual Financial Report FY 2003 (Version 1.0) 14

Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Macon State College had accrued liability for compensated absences in the amount of $718,963.17 as of 7-1-2002. For FY2003, $551,587.44 was earned in compensated absences and employees were paid $462,140.83, for a net increase of $89,446.61. The ending balance as of 6-30-2003 in accrued liability for compensated absences is $808,409.78.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The College's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus).
Annual Financial Report FY 2003 (Version 1.0) 15

Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted Total Unrestricted Net Assets

June 30, 2003
$509,764.82 784,339.06 344,396.92
1,118,636.30 $2,757,137.10

When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes Macon State College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the College, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental
Annual Financial Report FY 2003 (Version 1.0) 16

programs, are recorded as either operating or nonoperating revenues in the College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for sponsored and unsponsored scholarships.
Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus Macon State College) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus Macon State College), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Annual Financial Report FY 2003 (Version 1.0) 17

Categorization of Deposits
The College's cash deposits are categorized by risk as follows:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the College or by its agent in the College's name.
Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the College's name.
Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the College's name, and amounts uncollateralized.
Cash Deposits as of June 30, 2003

C ash De posits Inve stme nt Portfolio Accounts
Total C ash De posits

C a rryi n g Am ou n t
$2,033,474.23 13,128.43
$2,046,602.66

Bank B al an ce s
$3,333,942.06 13,128.43
$3,347,070.49

Risk Categories

1

2

3

$100,000.00 13,128.43

$3,233,942.06

$113,128.43

$0.00 $3,233,942.06

Categorization of Investments
The College's investments are categorized as to credit risk within the three categories described below:
Category 1 - Insured or registered, or securities held by the College or its agent in the College's name
Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the Colleges name.
Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the Colleges name.

Annual Financial Report FY 2003 (Version 1.0) 18

At June 30, 2003, the College's investments consisted of the following:

Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the College did not own any specific, identifiable investment securities of the pool.

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2003.

Student Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal, State, and Private Funds Other
Less Allowance for Doubtful Accounts
Net Accounts Receivable

June 30, 2003
$1,933,135.42 260,508.02 (26,289.64)
1,655,736.55 3,823,090.35
$3,823,090.35

Annual Financial Report FY 2003 (Version 1.0) 19

Note 4. Inventories

Inventories consisted of the following at June 30, 2003.

B o o k sto re Fo o d S e rv ic e s P h y s ic a l P la n t O th e r
T o ta l

June 30, 2003 $ 3 6 5 ,9 1 2 .6 4
$ 3 6 5 ,9 1 2 .6 4

Note 5. Notes/Loans Receivable
Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2003 and 2002. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the College for amounts cancelled under these provisions. As the College determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The College has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2003 Macon State College had no allowance for uncollectible loans.

Annual Financial Report FY 2003 (Version 1.0) 20

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2003.

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$483,411.84
483,411.84

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

26,281,332.42 1,506,199.00 1,819,612.66
3,050,906.55
32,658,050.63

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

7,848,131.44 532,056.97
1,262,255.57
2,650,513.59
12,292,957.57

Total Capital Assets, Being Depreciated, Net 20,365,093.06

Capital Assets, net

$20,848,504.90

Additions
$0.00 216,563.58 216,563.58

Reductions $0.00 0.00

Ending Balance 6/30/2003
$483,411.84 216,563.58 699,975.42

248,478.42 113,301.92 361,780.34

14,800.00 125,580.30
18,212.00 158,592.30

0.00 26,266,532.42
1,506,199.00 1,942,510.78
0.00 3,145,996.47
0.00 32,861,238.67

676,919.71 62,156.90
177,044.92
120,518.00
1,036,639.53
(674,859.19)
($458,295.61)

854,114.61 59,421.56
103,229.33
26,524.25
1,043,289.75

0.00 7,670,936.54
534,792.31 1,336,071.16
0.00 2,744,507.34
0.00 12,286,307.35

(884,697.45) 20,574,931.32

($884,697.45) $21,274,906.74

Annual Financial Report FY 2003 (Version 1.0) 21

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2003.

Pre pa id Tuition a nd Fe e s Research O ther D e fe rre d R e v enue
Tota ls

June 30, 2003 $3,307,394.62
12,753.00 $3,320,147.62

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2003 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total
Total Long Term Obligations

Beginning Balance July 1, 2002
$0.00
718,963.17 718,963.17 $718,963.17

Additions $0.00

Reductions

Ending Balance June 30, 2003

$0.00

$0.00

551,587.44 551,587.44 $551,587.44

462,140.83 462,140.83

808,409.78 0.00
808,409.78

$462,140.83 $808,409.78

Current Portion
$0.00
452,166.49 452,166.49 $452,166.49

(a) The beginning balance includes the amount shown as current in FY2002 and reclassified as long-term in FY2003.

Note 9. Lease Obligations
Macon State College had no capital leases or installment purchase agreements for the acquisition of real property during fiscal year 2003.

Annual Financial Report FY 2003 (Version 1.0) 22

Note 10. Retirement Plans

Teachers Retirement System Of Georgia

Plan Description Macon State College participates in the Teachers Retirement System of Georgia (TRS), a costsharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Macon State College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Macon State College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$904,218.21 $877,763.09 $1,073,549.80

Regents Retirement Plan

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.

Funding Policy Macon State College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statue and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation. Employees contribute 5% of their

Annual Financial Report FY 2003 (Version 1.0) 23

earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times.
Macon State College and the covered employees made the required contributions of $425,133.10 and $212,142.28 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description Macon State College participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $37,090.43 which represents 7.50% of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
Macon State College is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Macon State College and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue
Annual Financial Report FY 2003 (Version 1.0) 24

Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Macon State College, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Macon State College expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Macon State College (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
Note 13. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University
Annual Financial Report FY 2003 (Version 1.0) 25

System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 67 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, Macon State College recognized as incurred $269,613.22 of expenditures, which was net of $108,957.26 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 26

Note 14. Natural Classifications With Functional Classifications The College's operating expenses by functional classification for FY 2003 are shown below:

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003
Functional Classification F Y 2003

Natural C lassification

Instruction

Research

Public Service

Academic Support

Faculty Staff B enefits P erso nal Services Travel Scho larships and Fello wships Utilities Supplies and Others Services Depreciatio n

$ 9,057,430.01 936,743.01
2,301,582.96
98,885.41
73,213.25 1,115,352.75
17,789.28

$ 0.00

$ 23,480.16 129,884.64
31,851.79
3,401.58
4,449.99 149,232.90

$ 83,023.60 1,336,116.37 350,076.25
8,625.70 1,586.70 52,801.70 481,961.78 6,421.08

To tal Expenses

$ 13,600,996.67

$ 0.00

$ 342,301.06

$ 2,320,613.18

Student Services
$ 37,237.12 1,426,536.58
375,457.97
23,198.11 33,247.00 31,639.35 351,854.93
385.74
$ 2,279,556.80

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003

Natural Classification

Institutional Support

Plant Operations & Maintenance

Functional Classification FY2003

Scholarships & Fellowships

Auxiliary Enterprises

Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation

$0.00 1,652,389.16 896,970.74
20,629.57
55,240.35 899,368.57 (92,271.66)

$0.00 682,272.18 210,738.55 (27,058.20)
3,709.12
556,328.38 1,467,212.19
433.62

$0.00 2,959,077.84

$0.00 130,467.52
37,158.92 27,058.20
3,740.75
2,818.44 2,175,530.60
15,034.29

Total Expenses

$3,432,326.73

$2,893,635.84

$2,959,077.84

$2,391,808.72

Unallocated Expenses $0.00
992,207.13 $992,207.13

Total Expenses
$9,201,170.89 6,294,409.46 4,203,837.18
0.00 162,190.24 2,993,911.54 776,491.46 6,640,513.72 939,999.48
$31,212,523.97

Annual Financial Report FY 2003 (Version 1.0) 27

Medical College of Georgia
Financial Report
For the Year Ended June 30, 2003
Medical College of Georgia Augusta, Georgia
President Daniel W. Rahn, M.D.

Medical College of Georgia ANNUAL FINANCIAL REPORT
Fiscal Year 2003
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 7 Statement of Revenues, Expenses, and Changes in Net Assets........................................... 8 Statement of Cash Flows ..................................................................................................... 9 Note 1 Summary of Significant Accounting Policies ...................................................... 11 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 16 Note 3 Accounts Receivable............................................................................................. 19 Note 4 Inventories............................................................................................................. 19 Note 5 Notes Receivable................................................................................................... 19 Note 6 Capital Assets........................................................................................................ 20 Note 7 Deferred Revenue.................................................................................................. 21 Note 8 Long-Term Liabilities ........................................................................................... 21 Note 9 Lease Obligations.................................................................................................. 22 Note 10 Retirement Plans ................................................................................................. 23 Note 11 Risk Management................................................................................................ 28 Note 12 Contingencies...................................................................................................... 28 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 29 Note 14 Natural Classifications With Functional Classifications..................................... 30

Medical College of Georgia
Management's Discussion and Analysis

Introduction

Medical College of Georgia (MCG), the oldest school of medicine in Georgia, was incorporated in 1828 as the Medical Academy of Georgia and is one of the 34 institutions of the University System of Georgia. The College, located in Augusta, Georgia, has become known for its worldclass instructional, clinical, and research programs. The College offers more than 40 academic programs in allied health sciences, dentistry, graduate studies, medicine, and nursing at the certificate, baccalaureate, masters, doctoral and first professional levels. Additionally, MCG offers residency training in medical and dental specialty areas. This wide range of educational opportunities attracts a highly qualified faculty and student body of more than 2,400 students each year. A brief historical comparison of faculty and student levels follows:

Faculty

Students

Fiscal Year 2003 Fiscal Year 2002 Fiscal Year 2001

625

2,453

590

2,377

617

2,409

Overview of the Financial Statements and Financial Analysis

Medical College of Georgia is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of MCG. The Statement of Net Assets presents end-of-year data concerning assets (current and non-current), liabilities (current and non-current), and net assets (assets minus liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements.

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors and lending institutions.
Medical College of Georgia Annual Financial Report FY 2003 1

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

Assets: Current Assets Capital Assets, net Other Assets Total Assets

June 30, 2003
$111,533,475.02 168,083,694.68 7,127,715.06 286,744,884.76

June 30, 2002
$104,087,832.35 160,821,105.25 7,859,534.62 272,768,472.22

Liabilities: Current Liabilities Noncurrent Liabilities Total Liabilities

58,253,858.79 10,857,768.71 69,111,627.50

52,917,402.02 52,917,402.02

Net Assets: Invested in Capital Assets, net of debt Restricted - nonexpendable Restricted - expendable Capital Projects Unrestricted Total Net Assets

167,824,021.12 1,597,916.75
46,955,073.28 22,352,303.00 (21,096,056.89) $217,633,257.26

160,837,235.40 1,597,916.75
42,922,284.20 27,682,894.13 (13,189,260.28) $219,851,070.20

The total assets of the College increased by $14 million from June 30, 2002 to June 30, 2003. As the Statement of Net Assets reveals, that increase was primarily due to increases of approximately $7.5 million in cash, $7.4 million in accounts receivable, and $7.3 million in capital assets, net of accumulated depreciation. See Note 1 in the notes to the financial statements for additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets. These increases are offset by a decrease of approximately $6.5 million in other assets, which is primarily the result of a transfer of prepaid costs to the capital assets category upon project completion.
The total liabilities for the year increased by approximately $16.2 million from June 30, 2002 to June 30, 2003. The increase was primarily due to increases in accounts payable and accrued liabilities of $3.6 million, deferred revenue of $7.0 million, and compensated absences (current and non-current) of $5.6 million. The combination of the increase in total assets of $14 million
Medical College of Georgia Annual Financial Report FY 2003 2

and the increase in total liabilities of $16.2 million yields a decrease in total net assets of approximately $2.2 million. The decrease in total net assets primarily reflects a decrease in unrestricted net assets.
Statement of Revenues, Expenses and Changes in Net Assets
Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the College, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking, operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example, state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

Operating Revenues Operating Expenses Operating Loss
Nonoperating Revenues and Expenses
Income (Loss) Before other revenues, expenses, gains or losses
Other revenues, expenses, gains or losses
Increase in Net Assets
Net Assets at beginning of year, as originally reported Cumulative effect of changes in accounting principle Prior Year Adjustments Net Assets at beginning of year, restated
Net Assets at End of Year

June 30, 2003 $294,917,637.36
424,668,625.49 (129,750,988.13) 113,662,012.10
(16,088,976.03) 15,016,134.48 (1,072,841.55) 219,851,070.20 (1,144,971.39) 218,706,098.81 $217,633,257.26

June 30, 2002 $278,029,508.14
402,391,911.63 (124,362,403.49) 114,715,172.90
(9,647,230.59) 178,336.01
(9,468,894.58) 511,066,485.20 (281,746,520.42) 229,319,964.78 $219,851,070.20

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a decline in net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:
Medical College of Georgia Annual Financial Report FY 2003 3

Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

June 30, 2003

Operating Revenue Tuition and Fees G rants and C ontracts Sales and S ervices of Educational D epartm A ux ilia r y O the r

$13,601,178.73 266,251,237.04
4,051,656.95 4,411,014.01 6,602,550.63

Total Operating Revenue

294,917,637.36

Nonoperating Revenue State A ppropriations G ifts Investment Income G rants and C ontracts O the r

114,712,386.51
(16,001.17) 15,016,134.48 (1,035,873.25)

Total Nonoperating Revenue

128,676,646.57

C apital G ifts and Grants State C apital Appropriations Other C apital G ifts and G rants

Total C apital G ifts and G rants

0.00

Total Revenues

$423,594,283.93

June 30, 2002
$11,547,182.33 246,835,247.63
8,132,675.55 4,004,033.08 7,510,369.55 278,029,508.14
114,773,301.71 401,804.19 167,912.10 (470,552.53)
114,872,465.47
10,423.91 10,423.91 $392,912,397.52

Medical College of Georgia Annual Financial Report FY 2003 4

Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003
$100,859,860.77 23,228,674.45 74,701,740.91 16,733,373.67 2,305,278.33 32,425,175.63 11,742,295.12 2,252,998.11 5,332,055.41 1,514,331.01
153,572,842.08 424,668,625.49
(1,500.01)
$424,667,125.48

June 30, 2002
$95,648,285.42 20,511,694.79 68,212,448.71 12,317,850.01 1,783,663.22 29,241,879.60 10,554,182.15 1,837,125.86 4,205,179.55 188,608.94
157,890,993.38 402,391,911.63
(10,619.53)
$402,381,292.10

Total operating revenue increased by $16.9 million from 2002 to 2003, due primarily to an increase in nongovernmental grants and contracts of $17.0 million. The increase in nongovernmental grants and contracts was offset by a decrease in state and local grants and contracts of approximately $3.4 million and a decrease in sales and other services of $4.1 million. Federal grants and contracts increased by $5.8 million and student tuition and fees, net of scholarships, increased by $2.1 million.
The compensation and employee benefits category increased by approximately $21.6 million. The increase reflects incremental positions and, in some cases increased salaries, across the College. The increase also reflects an increased cost of health insurance for the employees of the College.
Non-operating revenues (expenses) reflects state appropriations of $114.7 million, which represents virtually identical funding as was received in Fiscal Year 2002. In addition, nonoperating revenues (expenses) includes a one-time write-off of $.8 million related primarily to losses on the retirement of capital assets, as well as $.2 million related to the return of loan funds to the Federal government during 2003. Changes in the market value of investments resulted in a reduction of $.7 million from 2002 to 2003 in investment income.

Medical College of Georgia Annual Financial Report FY 2003 5

Statement of Cash Flows
The final statement presented by the College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.
Cash Flows for the Year Ended June 30, 2003, Condensed

Cash Provided (used) By: Operating Activities Non-capital Financing Activities Investing Activities Capital and Related Financing Activities
Net Change in Cash Cash, Beginning of Year Cash, End of Year

June 30, 2003
($102,945,711.20) 128,505,739.22 873,202.70 (18,976,425.80) 7,456,804.92 18,758,181.77 $26,214,986.69

Capital Assets

The College had only one significant facility addition in fiscal year 2003. Construction of the Wellness Center was completed, and the Center was placed into service. This addition is reflected in the Capital Assets category. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Economic Outlook

The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is strong. Management will maintain a close watch over resources in fiscal year 2004 to maintain the College's ability to react to unknown internal and external issues.

_______________________ Daniel W. Rahn, M.D., President Medical College of Georgia

Medical College of Georgia Annual Financial Report FY 2003 6

Statement of Net Assets

M E DIC A L C O LLE GE O F GE O RGIA STATEM ENT O F NET ASSETS June 30, 2003
ASSETS Curre nt A sse ts C a sh a nd C a sh Equiv a le nts S ho rt-te rm Inv e stm e nts A cco unts R e ce iv a ble , ne t Inv e nto rie s O the r A sse ts T o ta l C urre nt A sse ts

June 30, 2003
$26,214,986.69 25,752,282.87 28,169,112.90 436,773.18 30,960,319.38
111,533,475.02

Noncurre nt A sse ts Noncurrent C ash Inv e stm e nts No te s R e ce iv a ble , ne t C a pita l A sse ts, ne t To ta l No ncurre nt A sse ts TOTAL ASSETS

1,597,916.75 5,529,798.31 168,083,694.68 175,211,409.74 286,744,884.76

LIA BILIT IE S Curre nt Lia bilitie s
A cco unts P a y a ble a nd A ccrue d Lia bilitie s D e po sits D eferred Revenue O the r Lia bilitie s D e po sits He ld fo r O the r O rg a niza tio ns C o m pe nsa te d A bse nce s (curre nt po rtio n)
To ta l C urre nt Lia bilitie s Noncurre nt Lia bilitie s
C o m pe nsa te d A bse nce s Lo ng-te rm Lia bilitie s
T o ta l No ncurre nt Lia b ilitie s TOTA L LIA BILITIES

23,384,265.53
23,359,242.23 208,749.98
1,266,648.48 10,034,952.57 58,253,858.79
10,806,845.13 50,923.58
10,857,768.71 69,111,627.50

NET ASSETS Inv e ste d in C a pita l A sse ts, ne t o f re la te d de bt R e stricte d fo r No ne x pe nda ble Ex pe ndable C a pita l P ro je cts Unre stricte d TOTAL NET ASSETS

167,824,021.12
1,597,916.75 46,955,073.28 22,352,303.00 (21,096,056.89) $217,633,257.26

Medical College of Georgia Annual Financial Report FY 2003 7

Statement of Revenues, Expenses and Changes in Net Assets

MEDICAL COLLEGE OF GEORGIA STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2003
June 30, 2003

REVENUES

Operating Revenues

Student Tuition and Fees

$15,098,245.46

Less: Sponsored and Unsponsored Scholarships

(1,497,066.73)

Federal Appropriations

Federal Grants and C ontracts

23,627,981.67

State and Local Grants and C ontracts

125,170,644.36

Nongovernmental Grants and C ontracts

117,452,611.01

Sales and Services of Educational Departments

4,051,656.95

Auxiliary Enterprises

4,411,014.01

Other Operating Revenues

6,602,550.63

Total Operating Revenues

294,917,637.36

EXPENSES

Operating Expenses

Salaries:

Faculty Staff

73,428,394.69 151,377,711.56

Benefits Other Personal Services

70,195,287.98

Travel

1,690,374.41

Scholarships and Fellowships

2,252,998.11

Utilities

5,676,218.32

Supplies and Other Services Depreciation

109,366,057.40 10,681,583.02

Total Operating Expenses

424,668,625.49

Operating Income (loss) NONOPERATING REVENUES (EXPENSES)

(129,750,988.13)

State Appropriations

114,712,386.51

Gifts

Investment Income (endowments, auxiliary and other) Interest Expense (capital assets)

(16,001.17) 1,500.01

Other Nonoperating Revenues

(1,035,873.25)

Net Nonoperating Revenues

113,662,012.10

Income before other revenues, expenses, gains, or loss

(16,088,976.03)

State C apital Appropriations

C apital Grants and Gifts

Federal Grants & C ontracts

110,832.00

State Grants & C ontracts

Other Grants and C ontracts

14,905,302.48

Total Other Revenues

15,016,134.48

Increase in Net Assets NET ASSETS

(1,072,841.55)

Net Assets-beginning of year, as originally reported

219,851,070.20

C umulative effect of changes in accounting principle

Prior Year Adjustments

(1,144,971.39)

Net Assets-beginning of year, restated

218,706,098.81

Net Assets-End of Year

$217,633,257.26

Medical College of Georgia Annual Financial Report FY 2003 8

Statement of Cash Flows
MEDICAL COLLEGE OF GEORGIA STATEMENT OF C ASH FLOWS
For the Year Ended June 30, 2003
CASH F LOWS F ROM OPE RATING A CTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales and Services of Educational D epartments Paym ents to Suppliers Paym ents to Em ployees Payrments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Em ployees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities
CASH F LOWS F ROM NON- CAPITA L F INANCING ACTIVIT IE S State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing A ctivities
CASH F LOWS F ROM CAPIT AL AND RELATED F INA NCING A CTIVITIES C apital Grants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities
CASH F LOWS F ROM INVESTING ACT IVITIES Proceeds from Sales and Maturities of Investments Interest on Investm ents Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003
$13,763,874.07
265,169,956.29 4,051,656.95
(176,848,412.15) (219,188,611.55)
(2,252,998.11) (1,503,569.88) 2,235,389.44
857,586.85 1,580,424.31
571,076.20 671,313.20
729,427.96 7,217,175.22 (102,945,711.20)
114,712,386.51 (186,908.52)
13,980,261.23 128,505,739.22
2,297,958.81 (21,167,016.33)
(105,868.27) (1,500.01)
(18,976,425.80)
889,203.87 (16,001.17)
873,202.70 7,456,804.92 18,758,181.77 $26,214,986.69

Medical College of Georgia Annual Financial Report FY 2003 9

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating Activities
Depreciation C hange in Assets and Liabilities:
Receivables, net Inventories Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($129,750,988.13)
10,681,583.02
(6,623,146.07) 9,068.82
6,467,855.19 3,602,601.95 7,049,819.32
5,617,494.70
($102,945,711.20)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current Assets

$26,214,986.69 $26,214,986.69

** NON-C ASH INVESTING, NON-C APITAL FINANC ING, AND C APITAL AND RELATED FINANC ING TRANSAC TIONS

Fixed assets acquired by incurring capital lease obligations C hange in fair value of investments recognized as a component of interest i

$259,673.56 ($689,326.88)

Medical College of Georgia Annual Financial Report FY 2003 10

MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations Medical College of Georgia serves the local, State, and national communities by providing educational programs for health professionals, biomedical scientists, and educators at the undergraduate, graduate, and postgraduate levels and for lifelong learning through excellence in teaching and the total development of students in response to the health needs of the State of Georgia. The College strives to be a leading center of excellence in research through the generation and application of biomedical knowledge and technology to human health and disease, and to play an expanding role in the transfer of technology to the health care delivery system.
Reporting Entity Medical College of Georgia is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Medical College of Georgia as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Medical College of Georgia does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Medical College of Georgia is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the College is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets,
Medical College of Georgia Annual Financial Report FY 2003 11

revenues, expenses, changes in net assets and cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
Basis of Accounting For financial reporting purposes, the College is considered a special-purpose government engaged only in business-type activities. Accordingly, the College's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-college transactions have been eliminated.
The College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date.
Restatement of Net Assets Beginning of Year As a result of the adoption of GASB Statement No. 34, the College was also required to make certain changes in accounting principles, specifically (1) adoption of depreciation on capital assets, and (2) recording of compensated absences. GASB Statement No. 34 requires certain summer semester revenues be recognized between fiscal years rather than the fiscal year in which the semester was predominantly conducted. The University System of Georgia has chosen to continue to record summer revenue in the year in which the semester was predominantly conducted. Net assets at July 1, 2001 were reduced by $281,746,520.42 for the cumulative effect of these changes.
Cash and Cash Equivalents Cash and Cash Equivalents consists of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. Detailed information on Cash is included within Note 2 to the financial statements.
Short-term Investments Short-term Investments consists of MCG balances maintained primarily within the State Investment Pool and the Board of Regents Total Return Fund. Detailed information on Investments is included within Note 2 to the financial statements.
Accounts Receivable Accounts Receivable consists of balances due to the College related to student tuition and fee charges, as well as auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts Receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with
Medical College of Georgia Annual Financial Report FY 2003 12

reimbursement of allowable expenditures made pursuant to the College's grant and contracts. Detailed information on Accounts Receivable is included within Note 3 to the financial statements.
Inventories Consumable supplies and fuel oil are recorded on the consumption method and are valued at cost using the first-in, first-out basis. Resale Inventories are valued at cost using the first-in, first-out method. Detailed information on Inventories is included within Note 4 to the financial statements.
Other Assets Other Assets consists entirely of prepaid items. Prepaid items are payments to vendors in advance of the receipt of goods and services that will benefit subsequent periods and Early Retirement Program pension costs paid in advance.
Noncurrent Cash Cash that is externally restricted and cannot be used to pay current liabilities is classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital Assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the College's capitalization policy includes all items with a unit cost of $5,000 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment. The depreciation calculation also reflects a ten percent residual value estimate.
During fiscal year 2003, the University System of Georgia recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to the Medical College of Georgia when
Medical College of Georgia Annual Financial Report FY 2003 13

complete. For the year ended June 30, 2003, GSFIC transferred capital additions valued at $5,305,389.73 to the College, which includes $78,566.40 of capitalized equipment.
Deferred Revenue Deferred Revenue includes amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred Revenue also includes amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. MCG had accrued liability for compensated absences in the amount of $15,224,303 as of July 1, 2002. For FY 2003, $15,496,961 was earned in compensated absences. Employees were paid $12,838,470, which is offset by other adjustments and salary changes of $2,959,004. The ending balance as of June 30, 2003 in accrued liability for compensated absences is $20,841,798.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The College's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Medical College of Georgia Annual Financial Report FY 2003 14

Restricted net assets - capital projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.

Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty, and staff.

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted Total Unrestricted Net Assets

June 30, 2003
$835,827.34 9,377,581.58
433,644.22 (31,743,110.03) ($21,096,056.89)

When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes Medical College of Georgia, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
Medical College of Georgia Annual Financial Report FY 2003 15

Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the College, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for sponsored and unsponsored scholarships.
Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus Medical College of Georgia) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
Medical College of Georgia Annual Financial Report FY 2003 16

As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Medical College of Georgia), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Categorization of Deposits
The College's cash deposits are categorized by risk as follows:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the College or by its agent in the College's name.
Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the College's name.
Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the College's name, and amounts uncollateralized.
Cash Deposits as of June 30, 2003

Cash Deposits Investment Portfolio Accounts
Total Cash Deposits

Carrying Amount
$26,192,678.69 22,282.91
$26,214,961.60

Bank Balances
$38,318,783.06 22,282.91
$38,341,065.97

Risk Categories

1

2

3

$119,883.89 22,282.91

$0.00 $38,198,899.17

$142,166.80 $0.00 $38,198,899.17

Medical College of Georgia Annual Financial Report FY 2003 17

Categorization of Investments

The College's investments are categorized as to credit risk within the three categories described below:

Category 1 - Insured or registered, or securities held by the College or its agent in the College's name.

Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the College's name.

Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the College's name.

At June 30, 2003, the College's investments consisted of the following:

Type of Investments
C ommon Stock C orporate Bonds Securities and C orporate Obligations

Risk C ategories

1

2

$0.00

$0.00

3 $0.00

C arrying Amount
$0.00

Totals

$0.00

$0.00

$0.00

$0.00

Investments Not Subject to C ategorizations: Board of Regents
Short-Term Fund Balanced Income Fund Total Return Fund Investment Portfolio Accounts Mutual Funds Real Estate State Investment Pool Short-Term Investments
Total Investments

6,698,666.77 429,522.58
20,199,727.36 $27,327,916.71

Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the College did not own any specific, identifiable investment securities of the pool.

Medical College of Georgia Annual Financial Report FY 2003 18

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2003.

June 30, 2003

Student Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal, State, and Private Funds O th e r
Less Allowance for Doubtful Accounts

$240,568.40 13,327.52
26,444,243.02 1,470,973.96
28,169,112.90

Net Accounts Receivable

$28,169,112.90

Note 4. Inventories

Inventories consisted of the following at June 30, 2003.

B o o k s to re Fo o d S e rv ic e s P h y s ic a l P la n t O th e r
T o ta l

June 30, 2003 $3 7 7,3 19 .0 8
5 9,4 54 .1 0 $4 3 6,7 73 .1 8

Note 5. Notes Receivable
Notes receivable represents student loans made through the Federal Perkins Loan Program (the Program). The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the College for amounts cancelled under these provisions. As the College determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. Management considers all loans to be collectible and has not provided an allowance for uncollectible loans.

Medical College of Georgia Annual Financial Report FY 2003 19

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2003.

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$8,998,281.93
8,998,281.93

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

212,749,297.00 2,339,679.00
53,713,906.44 216,910.00
13,114,174.99
282,133,967.43

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

88,276,063.97 1,276,876.92
30,876,035.05 52,810.17
9,829,358.00
130,311,144.11

Total Capital Assets, Being Depreciated, Net 151,822,823.32

Capital Assets, net

$160,821,105.25

Additions
$0.00 450,134.99 450,134.99

Reductions $0.00 0.00

Ending Balance 6/30/2003
$8,998,281.93 450,134.99
9,448,416.92

12,009,588.33
4,765,931.30 422,815.70
1,128,878.62
18,327,213.95

2,739,905.00
10,369,882.22 222,289.10 311,812.00
13,643,888.32

0.00 222,018,980.33
2,339,679.00 48,109,955.52
417,436.60 13,931,241.61
0.00 286,817,293.06

8,541,515.27 109,907.76
4,407,833.81 285,273.61 745,294.00
14,089,824.45
4,237,389.50
$4,687,524.49

10,528,375.78 138,678.48
5,185,782.22 54,304.78
311,812.00
16,218,953.26

0.00 86,289,203.46
1,248,106.20 30,098,086.64
283,779.00 10,262,840.00
0.00 128,182,015.30

(2,575,064.94) 158,635,277.76

($2,575,064.94) $168,083,694.68

Medical College of Georgia Annual Financial Report FY 2003 20

Note 7. Deferred Revenue

Deferred Revenue consisted of the following at June 30, 2003.

P re p a id T u itio n a n d Fe e s R e se a rch O th e r D e fe rre d R e v e n u e
T o ta ls

June 30, 2003
$ 2,94 3 ,9 34 .0 0 1 9,96 9 ,4 38 .8 8
44 5 ,8 69 .3 5
$ 2 3,35 9 ,2 42 .2 3

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2003 was as follows:

Leases Lease Obligations

Balance July 1, 2002
$148,455.53

Additions

Reductions

Balance June 30, 2003

$259,673.56

$148,455.53

$259,673.56

Current Portion
$208,749.98

Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total

15,224,303.00 15,224,303.00

15,496,960.50 15,496,960.50

9,879,465.80 9,879,465.80

20,841,797.70 20,841,797.70

10,034,952.57 10,034,952.57

Total Long Term Obligations

$15,372,758.53 $15,756,634.06 $10,027,921.33 $21,101,471.26 $10,243,702.55

(a) The beginning balance includes the amount shown as current in FY2002 and reclassified as long-term in FY2003.

Medical College of Georgia Annual Financial Report FY 2003 21

Note 9. Lease Obligations

MCG is obligated under various operating leases for the use of equipment.

Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2003, were as follows:

Year Ending June 30:

Year

2004

1

2005

2

2006

3

2007

4

2008

5

2009 through 2011

6-10

2012 through 2018

11-15

2019 through 2023

16-20

2024 through 2028

21-25

2029 through 2033

26-30

2034 through 2038

31-35

2039 through 2043

36-40

Total m inim um lease paym ents

Less: Interest

Less: Executory costs (if paid)

Principal O utstanding

Real Property

C apital Lease s

Operating Leases

$208,749.98 37,404.78 11,070.80 2,448.00

$6,564.00 6,564.00 6,564.00

259,673.56 910.83 0.00
$258,762.73

$19,692.00

CAPITAL LEASES

Capital Leases are generally payable in monthly installments and have terms expiring in various years between 2004 and 2007. Expenditures for fiscal year 2003 were $107,368.28 of which $1,500.01 represented interest. Total principal paid on capital leases was $105,868.27 for the fiscal year ended June 30, 2003. Interest rate is 3.25 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2003:

Equipment

$259,673.56

Totals

$259,673.56

Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms.

MCG has various capital leases for equipment with an outstanding balance at June 30, 2003 in the amount of $259,673.56.

Medical College of Georgia Annual Financial Report FY 2003 22

OPERATING LEASES
MCG's noncancellable operating leases having remaining terms of more than one year expire in fiscal year 2006. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment.

Note 10. Retirement Plans

Teachers Retirement System Of Georgia

Plan Description The Medical College of Georgia participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Medical College of Georgia who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Medical College of Georgia makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$11,850,917.51 $11,359,998.41 $15,431,614.25

Regents Retirement Plan

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators.
Medical College of Georgia Annual Financial Report FY 2003 23

Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.
Funding Policy Medical College of Georgia makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statue and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.
MCG and the covered employees made the required contributions of $5,986,435.58 (10.02%) and $2,975,530.43 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description MCG participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $218,112.50 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Medical College of Georgia Annual Financial Report FY 2003 24

MCG Early Retirement Plan Plan Description The Medical College of Georgia (MCG) Early Retirement Pension Plan (ERP) is a singleemployer defined benefit pension plan administered by Buck Consultants. The plan was devised by MCG as a means of manpower reduction and was approved by the Board of Regents of the University System of Georgia (BOR) effective January 1, 2000. The manpower reduction plan was designed to allow vested employees aged 55 or employees of any age with 25 years of creditable service to retire without penalties as applied by the Teachers Retirement System of Georgia (TRS) for early retirement. The plan would allow for all participants to retire as if they were vested and aged 60 or had attained 30 years of creditable service. No other benefits will be paid by this plan. A financial statement is maintained by the Medical College of Georgia, Comptroller's Division, and is available for review during normal business hours. Funding Policy The plan is to be funded by the purchase of an annuity utilizing salary savings of departed employees. For fiscal year ended June 30, 2001, the funding period for the annuity is 15 years. The fund sources that provided for an employees salary, as of December 31, 1999, would be responsible for funding the annuity to provide the retiree benefits. There is no additional funding cost to the employee/retiree, BOR, or the State of Georgia for this plan. Since this plan was not pre-funded, MCG is taking an aggressive approach to collect and deposit as much into the annuity fund in the earlier years as is possible, thereby realizing a greater return on investment.
Medical College of Georgia Annual Financial Report FY 2003 25

Annual Pension Cost and Net Pension Obligation The ERP's annual pension cost and net pension obligation for the Fiscal Years 2002 and 2003 were as follows:

Fiscal Year 2003
Annual Required Contribution Interest on Net Pension Obligation Adjustments on Annual Required Contribution

Total $15,260,789.00
(721,386.40) 1,183,691.17

MCG $8,235,882.56
(687,732.64) 1,128,470.19

Other Units $7,024,906.44 (33,653.77)
55,220.98

Annual Pension Cost Contribution Made

$15,723,093.77 $8,676,620.11 $7,046,473.66 15,349,985.00 8,114,868.00 7,235,117.00

Increase (Decrease) in Net Pension Obligation Net Pension Obligation Beginning of Year

$373,108.77 $561,752.11 $(188,643.34) (9,618,485.36) (9,169,768.49) (448,716.88)

Net Pension Obligation End of Year

$(9,245,376.60) $(8,608,016.38) $(637,360.22)

Fiscal Year 2002

Annual Required Contribution Interest on Net Pension Obligation Adjustments on Annual Required Contribution

Total $15,960,000.00
(762,229.31) 1,197,181.47

MCG $8,613,230.00
(719,427.49) 1,129,955.57

Other Units $7,346,770.00 (42,801.82)
67,225.89

Annual Pension Cost Contribution Made

$16,394,952.15 15,850,380.00

$9,023,758.08 $7,371,194.07 8,601,160.00 7,249,220.00

Increase (Decrease) in Net Pension Obligation Net Pension Obligation Beginning of Year

$544,572.15 $422,598.08 (10,163,057.52) (9,592,366.57)

$121,974.07 (570,690.95)

Net Pension Obligation End of Year

$(9,618,485.36) $(9,169,768.49) $(448,716.88)

Medical College of Georgia Annual Financial Report FY 2003 26

Three-Year Trend Information

Annual Pension Cost (APC) Percentage of APC Contributed Net Pension Obligation End of Year

FY 2003

Total

MCG

$15,723,093.77 $8,676,620.11

97.63%

93.53%

$(9,245,376.60) $(8,608,016.38)

Other Units $7,046,473.66
102.68% $(637,360.22)

Annual Pension Cost (APC) Percentage of APC Contributed Net Pension Obligation End of Year

FY 2002

Total

MCG

$16,394,952.15 $9,023,758.08

96.68%

95.32%

$(9,618,485.36) $(9,169,768.49)

Other Units $7,371,194.07
98.35% $(448,716.88)

Annual Pension Cost (APC) Percentage of APC Contributed Net Pension Obligation End of Year

FY 2001

Total

MCG

$16,478,520.16 $8,888,945.86

79.49%

126.90%

$(10,163,057.52) $(9,592,366.57)

Other Units $7,589,574.30
23.96% $(570,690.95)

The annual required contribution for the current year was determined as part of the November 20, 2002 actuarial valuation using the Entry Age actuarial cost method. The remaining amortization period is 13 years utilizing the Level Dollar, Closed method. The asset valuation method is 5 year smoothed market value. The actuarial assumptions included (a) 7.5% rate of return on investment, (b) annual inflation of 3.5%, and (c) annual cost of living increases of 3.0%.

Medical College of Georgia Annual Financial Report FY 2003 27

Note 11. Risk Management
Medical College of Georgia is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Medical College of Georgia and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. MCG, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Medical College of Georgia expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims, and assessments filed against Medical College Georgia (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to
Medical College of Georgia Annual Financial Report FY 2003 28

be actions against the State of Georgia. Accordingly, significant litigation, claims, and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 1,676 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, Medical College of Georgia recognized as incurred $5,928,927.56 of expenditures, which was net of $1,911,981.46 of participant contributions.
Medical College of Georgia Annual Financial Report FY 2003 29

Note 14. Natural Classifications With Functional Classifications The College's operating expenses by functional classification for FY2003 are shown below:

Statement of Operating Expenses - Natural vs Func tional Classific ations For the Fisc al Year Ended June 30, 2003
Functional Classification F Y 2003

Natural C lassification

Instruction

Research

Public Service

Academic Support

Faculty Staff B enefits P erso nal Services Travel Scho larships and Fello wships Utilities Supplies and Others Services Depreciatio n

$ 37,258,068.78 25,024,676.66 18,671,723.29
638,233.10 6,262.00
933,517.27 11,142,166.01 7,185,213.66

$ 4,694,647.31 7,681,484.52 2,660,383.21
372,541.60 (6,262.00) 29,605.97
7,608,953.79 187,320.05

$ 28,339,312.27 30,323,041.60 9,988,206.76
175,050.89
394,992.50 5,037,602.91
443,533.98

$ 1,489,294.62 7,489,500.70 5,241,103.52
132,280.53
94,451.54 1,213,567.76 1,073,175.00

To tal Expenses

$ 100,859,860.77

$ 23,228,674.45

$ 74,701,740.91

$ 16,733,373.67

Student Services
$ 2,580.79 1,179,791.90 309,065.71
29,362.28
43,951.01 706,828.97
33,697.67
$ 2,305,278.33

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003

Natural Classification

Institutional Support

Plant Operations & Maintenance

Functional Classification FY2003

Scholarships & Fellowships

Auxiliary Enterprises

Unallocated Expenses

MCG only Patient Care

Total Expenses

Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation

$107,383.35 10,156,502.58 15,209,885.98
146,709.02
286,431.79 6,551,707.16
(33,444.25)

$18,797.65 4,038,886.33
1,214,128.95 (372,717.18)
4,663.90
3,494,719.85 3,294,867.14
48,948.48

$0.00 2,252,998.11

$40,880.15 1,243,323.75
408,691.18 372,717.18
6,629.06
82,257.19 2,948,749.48
228,807.42

$0.00 1,514,331.01

$1,477,429.77 64,240,503.52 16,492,099.38
184,904.03
316,291.20 70,861,614.18

$73,428,394.69 151,377,711.56 70,195,287.98 0.00 1,690,374.41 2,252,998.11 5,676,218.32
109,366,057.40 10,681,583.02

Total Expenses

$32,425,175.63

$11,742,295.12

$2,252,998.11 $5,332,055.41

$1,514,331.01

$153,572,842.08

$424,668,625.49

Medical College of Georgia Annual Financial Report FY 2003 30

MIDDLE GEORGIA COLLEGE
Financial Report
For the Year Ended June 30, 2003

Middle Georgia College Cochran, Georgia

Richard J. Federinko
President

Lynn E. Hobbs
Vice President for Fiscal Affairs

MIDDLE GEORGIA COLLEGE ANNUAL FINANCIAL REPORT
FY 2003
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 8 Statement of Revenues, Expenses and Changes in Net Assets............................................ 9 Statement of Cash Flows ................................................................................................... 10 Note 1 Summary of Significant Accounting Policies ...................................................... 12 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 17 Note 3 Accounts Receivable............................................................................................. 19 Note 4 Inventories............................................................................................................. 20 Note 5 Notes/Loans Receivable........................................................................................ 20 Note 6 Capital Assets........................................................................................................ 21 Note 7 Deferred Revenue.................................................................................................. 22 Note 8 Long-Term Liabilities ........................................................................................... 22 Note 9 Lease Obligations.................................................................................................. 23 Note 10 Retirement Plans ................................................................................................. 24 Note 11 Risk Management................................................................................................ 25 Note 12 Contingencies...................................................................................................... 26 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 27 Note 14 Natural Classifications With Functional Classifications..................................... 29

MIDDLE GEORGIA COLLEGE
Management's Discussion and Analysis

Introduction

Middle Georgia College is one of the 34 institutions of the University System of Georgia. The college was founded in 1884. Middle Georgia College is both a comprehensive two-year college serving central Georgia and a residential college serving traditional and non-traditional students from throughout Georgia and, to a limited extent, from other states and countries. The main campus in Cochran serves both commuting and residential students. The Dublin Center and selected off-campus sites serve commuting students from the middle Georgia area. Middle Georgia College awards associate degrees designed to transfer to four-year institutions or to prepare students for careers in 90 majors and concentrations, with popular programs including business administration, education and nursing. Enrollment for the college's 2003 Fall Semester is approximately 2,500 students, with the majority coming from the immediate area. The institution's student body continues to grow as shown by the comparison numbers that follow.

Faculty

Students

FY2003 FY2002 FY2001

126

2,214

133

2,164

127

1,941

Overview of the Financial Statements and Financial Analysis

Middle Georgia College is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2002 and FY 2003.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Middle Georgia College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements.

Annual Financial Report FY 2003 (Version 1.0) 1

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

Assets: C urrent Assets C apital Assets, net Other Assets Total Assets

June 30, 2003
$3,090,255.19 17,931,272.36
1,053,937.86 22,075,465.41

June 30, 2002
$2,777,886.77 15,062,418.30
1,156,371.77 18,996,676.84

Liabilities: C urrent Liabilities Noncurrent Liabilities Total Liabilities

1,615,673.70 228,725.96
1,844,399.66

1,878,302.66 1,584.00
1,879,886.66

Net Assets: Invested in C apital Assets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects Unrestricted Total Net Assets

17,929,688.36 32,829.99
1,109,592.47
1,158,954.93 $20,231,065.75

15,010,139.57 33,633.82 43,666.46
2,029,350.33 $17,116,790.18

The total assets of the institution increased by $3,078,788.57. The increase was primarily due to an increase of $2,868,854.06 for investment in plant, net of accumulated depreciation. See Note 1 in the notes to the financial statements for additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction and public service missions of the institution.
The total liabilities for the year decreased by ($35,487.00). The combination of the increase in total assets of $3,078,788.57 and the decrease in total liabilities of ($35,487.00) yields an
Annual Financial Report FY 2003 (Version 1.0) 2

increase in total net assets of $3,114,275.57. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $2,919,548.79.

Statement of Revenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30, 2003

Operating Revenues Operating Expenses Operating Loss

$7,820,550.53 18,975,600.39 (11,155,049.86)

Nonoperating Revenues and Expenses

10,532,678.14

Income (Loss) Before other revenues, expenses, gains or losses

(622,371.72)

Other revenues, expenses, gains or losses

282,447.43

Increase in Net Assets

(339,924.29)

Net Assets at beginning of year, as originally reported Cumulative effect of changes in accounting principle Prior Year Adjustments Net Assets at beginning of year, restated

17,116,790.18
3,454,199.86 20,570,990.04

Net Assets at End of Year

$20,231,065.75

June 30, 2002 $7,866,621.59 19,500,963.37 (11,634,341.78) 10,890,079.80
(744,261.98) 1,838,135.40 1,093,873.42 41,557,582.87 25,534,666.11 16,022,916.76 $17,116,790.18

The Statement of Revenues, Expenses, and Changes in Net Assets reflects an increase in net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:

Annual Financial Report FY 2003 (Version 1.0) 3

Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

Operating Revenue Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Auxiliary Other
Total Operating Revenue
Nonoperating Revenue State Appropriations Gifts Investment Income Grants and Contracts Other
Total Nonoperating Revenue
Capital Gifts and Grants State Capital Appropriations Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

June 30, 2003

June 30, 2002

$1,801,172.95 2,541,318.97 55,723.99 3,324,312.43 98,022.19
7,820,550.53

$1,788,436.16 2,256,232.83 129,074.88 3,606,297.56 86,580.16
7,866,621.59

10,579,967.61 6,020.00
(58,414.33) 282,447.43
8,716.58
10,818,737.29

10,826,273.00 6,200.00
(35,436.88) 415,553.31 100,000.00
11,312,589.43

0.00 $18,639,287.82

1,422,582.09 1,422,582.09 $20,601,793.11

Annual Financial Report FY 2003 (Version 1.0) 4

Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003
$4,693,524.49
102,785.08 1,762,336.76 1,309,727.02 2,267,728.83 2,069,757.24 2,505,486.59 3,269,288.36
994,966.02
18,975,600.39
3,611.72
$18,979,212.11

June 30, 2002
$6,405,606.52
70,498.11 1,690,080.10 1,378,104.06 2,222,779.26 2,554,576.41 1,024,347.05 3,120,160.19 1,034,811.67
19,500,963.37
6,956.32
$19,507,919.69

Total operating expenses decreased by ($525,362.98). The compensation and employee benefits category increased by approximately $91,138.97. The increase reflects an increase in the cost of health insurance for the employees of the institution. Additionally, the cost of compensated absences also increased during the year. Utilities decreased by approximately ($59,965.82) during the past year. Expenses associated with supplies and other services and travel decreased by ($547,853.08) and ($60,637.55), respectively. The college delayed or limited these type expenditures in response to state budget cuts.
Under non-operating revenues (expenses) state appropriations decreased by approximately ($246,305.39). The college continues to face the challenge of operating under reduced state appropriations. Non-operating grants and contracts decreased by ($133,105.88) due to a reduction in grants and contracts received from the federal government. Capital grants and gifts decreased by ($1,422,582.09). This amount represents the value of buildings donated to the college by the Veterans Administration in fiscal year 2002.
Included in the prior year adjustments for fiscal year 2003, is $1,955,901.48 to record the value of the land donated to the college by the Veterans Administration. The donated property will be the future site of the Dublin Campus. Prior year adjustments also include an adjustment to prior year accumulated depreciation for the residual value of assets.

Annual Financial Report FY 2003 (Version 1.0) 5

Statement of Cash Flows
The final statement presented by the Middle Georgia College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.
Cash Flows for the Year Ended June 30, 2003 Condensed

Cash Provided (used) By: Operating Activities Non-capital Financing Activities Investing Activities Capital and Related Financing Activities
Net Change in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2003
($10,095,927.12) 11,153,093.21 31,178.18 (455,219.61)
633,124.66 1,426,512.57
$2,059,637.23

Capital Assets
Additions to capital assets for fiscal year 2003 included the value of land donated by the Veterans Administration $1,955,901.48 and the renovation of a building to house computer services $181,000.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Annual Financial Report FY 2003 (Version 1.0) 6

Economic Outlook The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is stable. The college is continuing to manage the challenge of operating with reduced state appropriations. A number of vacant positions have gone unfilled. The College anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues. _______________________ Richard J. Federinko, President Middle Georgia College
Annual Financial Report FY 2003 (Version 1.0) 7

Statement of Net Assets
M ID D L E G E O RG IA C O L L E G E STA TE M E NT O F NE T A SSE TS
June 30, 2003
ASSETS Cu rre n t A s s e ts C a s h a n d C a s h E q u iv a le n ts S h o rt-te rm In v e s tm e n ts A c c o u n ts R e c e iv a b le , n e t In v e n to rie s O th e r A s s e ts T o ta l C u rre n t A s s e ts
No n c u rre n t A s s e ts Noncurrent C ash In v e s tm e n ts N o te s R e c e iv a b le , n e t C a p ita l A s s e ts , n e t T o ta l N o n c u rre n t A s s e ts TOTAL ASSETS
LIA BILIT IE S C u rre n t Lia b ilitie s A c c o u n ts P a y a b le a n d A c c ru e d Lia b ilitie s D e p o s its D e fe rre d R e v e nue O th e r Lia b ilitie s D e p o s its H e ld fo r O th e r O rg a n iz a tio n s C o m p e n s a te d A b s e n c e s (c u rre n t p o rtio n ) T o ta l C u rre n t Lia b ilitie s N o n c u rre n t Lia b ilitie s C o m p e n s a te d A b s e n c e s Lo n g -te rm Lia b ilitie s T o ta l N o n c u rre n t Lia b ilitie s T OT A L LIA BILIT IE S
NET ASSETS In v e s te d in C a p ita l A s s e ts , n e t o f re la te d d e b t R e s tric te d fo r N o n e x p e n d a b le E x p e n d a b le C a p ita l P ro je c ts U n re s tric te d TOTAL NET ASSETS

June 30, 2003
$ 2 ,0 5 9 ,6 3 7 .2 3
3 7 2 ,1 0 4 .2 6 2 9 9 ,2 6 8 .3 8 3 5 9 ,2 4 5 .3 2 3 ,0 9 0 ,2 5 5 .1 9
8 8 2 ,2 1 8 .8 2 1 7 1 ,7 1 9 .0 4 1 7 ,9 3 1 ,2 7 2 .3 6 1 8 ,9 8 5 ,2 1 0 .2 2 2 2 ,0 7 5 ,4 6 5 .4 1
5 8 0 ,1 1 9 .9 4 7 6 ,0 0 9 .6 9
7 4 7 ,0 5 1 .1 7 1 ,5 8 4 .0 0
(1 2 3 ,9 3 1 .8 0 ) 3 3 4 ,8 4 0 .7 0
1 ,6 1 5 ,6 7 3 .7 0
2 2 8 ,7 2 5 .9 6
2 2 8 ,7 2 5 .9 6 1 ,8 4 4 ,3 9 9 .6 6
1 7 ,9 2 9 ,6 8 8 .3 6
3 2 ,8 2 9 .9 9 1 ,1 0 9 ,5 9 2 .4 7
1 ,1 5 8 ,9 5 4 .9 3 $ 2 0 ,2 3 1 ,0 6 5 .7 5

Annual Financial Report FY 2003 (Version 1.0) 8

Statement of Revenues, Expenses and Changes in Net Assets

MIDDLE GEORGIA C OLLEGE STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS
for the Year Ended June 30, 2003

June 30, 2003

RE VE NU E S

O perating Revenues

S tudent Tuition and Fees

$3,203,142.65

Less: Sponsored and Unsponsored Scholarships

(1,401,969.70)

Federal A ppropriations

Federal G rants and C ontracts

2,537,968.97

S tate and Local G rants and C ontracts

3,350.00

Nongovernm ental G rants and C ontracts

Sales and Services of Educational D epartm ents

55,723.99

Auxiliary Enterprises

3,324,312.43

Other Operating Revenues

98,022.19

Total Operating Revenues

7,820,550.53

E XPE NS E S

Operating Expenses

S a la r ie s :

Fa c u lty S taff

4,178,198.50 4,862,871.70

B e n e fits Other Personal Services

2,694,635.03

Travel

59,733.58

Scholarships and Fellowships

1,211,547.45

U tilitie s

777,359.84

S upplies and O ther S ervices D epreciation

4,104,547.69 1,086,706.60

Total O perating Expenses

18,975,600.39

Operating Incom e (loss) NONOPERA T ING REVENUES (EXPENSE S)

(11,155,049.86)

S tate A ppropriations

10,579,967.61

G ifts

6,020.00

Investm ent Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets)

(58,414.33) (3,611.72)

Other Nonoperating Revenues

8,716.58

Net Nonoperating Revenues

10,532,678.14

Incom e before other revenues, expenses, gains, or loss

(622,371.72)

S tate C apital A ppropriations

C apital G rants and G ifts

Federal G rants & C ontracts

135,324.88

S tate G rants & C ontracts

13,150.00

Other G rants and C ontracts

133,972.55

Total Other Revenues

282,447.43

Increase in Net A ssets NET ASSETS

(339,924.29)

Net A ssets-beginning of year, as originally reported

17,116,790.18

C um ulative effect of changes in accounting principle

Prior Year Adjustm ents

3,454,199.86

Net A ssets-beginning of year, restated

20,570,990.04

Net Assets-End of Year

$20,231,065.75

Annual Financial Report FY 2003 (Version 1.0) 9

Statement of Cash Flows
MIDDLE GEORGIA COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2003
CASH F LOWS F ROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k ing /T r a ns p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities
CASH F LOWS F ROM NON-CAPITAL F INANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities
CASH F LOWS F ROM CAPITAL AND RELATED F INANCING ACTIVITIES C apital Grants and Gifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital Debt and Leases Interest Paid on C apital Debt and Leases Net C ash used by C apital and Related Financing Activities
CASH F LOWS F ROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003
$3,312,537.65
2,979,584.87 81,649.64
(8,063,610.04) (9,037,011.53) (2,613,517.15)
(5,139.00) 17,980.40
871,923.55 854,878.14 1,140,398.26
38,555.05 341,551.68
73,025.07 (88,733.71) (10,095,927.12)
10,579,967.61 284,658.17 288,467.43
11,153,093.21
(395,913.16) (55,694.73) (3,611.72)
(455,219.61)
334,099.54 29,374.77
(332,296.13) 31,178.18
633,124.66 1,426,512.57 $2,059,637.23

Annual Financial Report FY 2003 (Version 1.0) 10

Statement of Cash Flows, Continued

RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating Activities
D e p r e c ia tio n C hange in Assets and Liabilities:
Receivables, net I nv e nto r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($11,155,049.86)
1,086,706.60
364,507.97 (56,256.98) (83,304.42) (336,197.42) 43,553.54 15,641.54 24,471.91
($10,095,927.12)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current Assets

$2,059,637.23 0.00
$2,059,637.23

** NON-C ASH INVESTING, NON-C APITAL FINANC ING, AND C APITAL AND RELATED FINANC ING TRANSAC TIONS

C hange in fair value of investments recognized as a component of interest i

($80,616.45)

Annual Financial Report FY 2003 (Version 1.0) 11

MIDDLE GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations Middle Georgia College exists to provide the best educational environment possible for development of its students and community.
Reporting Entity Middle Georgia College is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Middle Georgia College as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Middle Georgia College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Middle Georgia College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the College is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of
Annual Financial Report FY 2003 (Version 1.0) 12

materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
Basis of Accounting For financial reporting purposes, the College is considered a special-purpose government engaged only in business-type activities. Accordingly, the College's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-college transactions have been eliminated.
The College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The College accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Consumable supplies are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost.
Annual Financial Report FY 2003 (Version 1.0) 13

Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the College's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia (and thus Middle Georgia College) recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Middle Georgia College when complete. For the year ended June 30, 2003, no capital additions were transferred from GSFIC to Middle Georgia College.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a College residence hall.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net
Annual Financial Report FY 2003 (Version 1.0) 14

Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Middle Georgia College had accrued liability for compensated absences in the amount of $539,094.75 as of 7-1-2002. For FY2003, $405,184.92 was earned in compensated absences and employees were paid $380,713.01, for a net increase of $24,471.91. The ending balance as of 6-30-2003 in accrued liability for compensated absences is $563,566.66.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The College's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and
Annual Financial Report FY 2003 (Version 1.0) 15

Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted Total Unrestricted Net Assets

June 30, 2003
$257,194.91 1,030,158.05
220,129.26 (348,527.29) $1,158,954.93

When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.

Income Taxes Middle Georgia College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.

Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:

Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.

Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.

Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the College, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees

Annual Financial Report FY 2003 (Version 1.0) 16

and other student charges, the College has recorded contra revenue for sponsored and unsponsored scholarships.
Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus Middle Georgia College) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus Middle Georgia College), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Annual Financial Report FY 2003 (Version 1.0) 17

Categorization of Deposits
The College's cash deposits are categorized by risk as follows:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the College or by its agent in the College's name.
Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the College's name.
Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the College's name, and amounts uncollateralized.
Cash Deposits as of June 30, 2003

C arrying Amount

Cash Deposits

$1,567,084.40

Investment Portfolio Accounts

26,935.76

Total Cash Deposits

$1,594,020.16

Bank Balances
$2,088,514.80 26,935.76
$2,115,450.56

Risk Categories

1

2

3

$100,000.00 $1,735,949.91 26,935.76

$252,564.89

$126,935.76 $1,735,949.91 $252,564.89

Categorization of Investments
The College's investments are categorized as to credit risk within the three categories described below:
Category 1 - Insured or registered, or securities held by the College or its agent in the College's name
Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the College's name.
Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the College's name.

Annual Financial Report FY 2003 (Version 1.0) 18

At June 30, 2003, the College's investments consisted of the following:

Type of Investm ents

Risk C ategories

1

2

3

C om m on S tock
C orporate Bonds S ecurities and C orporate O bligations

$737,905.80

T o ta ls

$737,905.80

$0.00

$0.00

C arrying Amount
$737,905.80 0.00 0.00
$737,905.80

Investm ents Not S ubject to C ategorizations: B oard of Regents
S hort-Term Fund Balanced Income Fund Total Return Fund Investm ent Portfolio A ccounts Mutual Funds R eal Estate S tate Investm ent Pool S hort-Term Investm ents
Total Inv estm ents

446,245.17 144,313.02
$1,328,463.99

Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the College did not own any specific, identifiable investment securities of the pool.

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2003.

S tu d e n t T u itio n a n d Fe e s A u x ilia ry E n te rp ris e s a n d O th e r O p e ra tin g A c tiv itie s Fe d e ra l, S ta te , a n d P riv a te Fu n d s O th e r
Le s s A llo w a n c e fo r D o u b tfu l A c c o u n ts
N e t A c c o u n ts R e c e iv a b le

June 30, 2003
$ 1 4 3 ,2 9 6 .3 8 2 1 4 ,6 1 3 .9 1
(1 6 6 ,7 8 5 .1 1 ) 2 5 4 ,0 0 2 .0 0 4 4 5 ,1 2 7 .1 8 7 3 ,0 2 2 .9 2
$ 3 7 2 ,1 0 4 .2 6

Annual Financial Report FY 2003 (Version 1.0) 19

Note 4. Inventories

Inventories consisted of the following at June 30, 2003.

B ook store Food S ervices Physical Plant O the r
T o ta l

June 30, 2003 $290,883.28
8,385.10 $299,268.38

Note 5. Notes/Loans Receivable
Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2003 and 2002. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the College for amounts cancelled under these provisions. As the College determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The College had no allowance for uncollectible loans at June 30, 2003.

Annual Financial Report FY 2003 (Version 1.0) 20

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2003.

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$18,400.00
18,400.00

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

494,674.00 27,156,848.23
2,708,179.00 1,680,671.09
364,584.54 2,154,981.67
34,559,938.53

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

401,501.41 13,569,297.78
2,092,324.61 1,378,955.25
168,052.18 1,905,789.00
19,515,920.23

Total Capital Assets, Being Depreciated, Net 15,044,018.30

Capital Assets, net

$15,062,418.30

Additions $1,955,901.48
1,955,901.48

Reductions $0.00 0.00

Ending Balance 6/30/2003
$1,974,301.48 0.00
1,974,301.48

181,000.00 13,262.50
133,977.59
67,673.07
395,913.16

104,945.00 104,945.00

494,674.00 27,337,848.23
2,721,441.50 1,709,703.68
364,584.54 2,222,654.74
0.00 34,850,906.69

(28,943.66) (587,650.01) (168,139.15) 189,634.28
22,082.76 53,410.00
(519,605.78)
915,518.94
$2,871,420.42

102,378.64
102,378.64 2,566.36
$2,566.36

372,557.75 12,981,647.77
1,924,185.46 1,466,210.89
190,134.94 1,959,199.00
0.00 18,893,935.81
15,956,970.88
$17,931,272.36

Annual Financial Report FY 2003 (Version 1.0) 21

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2003.

Prepaid Tuition and Fees Research Other D eferred Revenue
T o ta ls

June 30, 2003 $747,051.17
$747,051.17

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2003.

Leases Lease Obligations

Beginning Balance
July 1, 2002
$57,278.73

Additions $0.00

Reductions

Ending Balance June 30, 2003

$55,694.73

$1,584.00

C urrent Portion
$1,584.00

Other Liabilities C ompensated Absences (a) Other Long Term Liabilities Total

539,094.75 539,094.75

405,184.92 405,184.92

380,713.01 380,713.01

563,566.66 0.00
563,566.66

334,840.70 334,840.70

Total Long Term Obligations

$596,373.48 $405,184.92 $436,407.74

$565,150.66 $336,424.70

(a) The beginning balance includes the amount shown as current in FY 2002 and reclassified as long-term in FY2003.

Annual Financial Report FY 2003 (Version 1.0) 22

Note 9. Lease Obligations
Middle Georgia College is obligated under various operating and capital leases for the use of equipment. Future commitments for capital leases and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2003, were as follows.

Year Ending June 30:

Year

2004

1

2005

2

2006

3

2007

4

2008

5

2009 through 2011

6-10

2012 through 2018

11-15

2019 through 2023

16-20

2024 through 2028

21-25

2029 through 2033

26-30

2034 through 2038

31-35

2039 through 2043

36-40

Total m inim um lease paym ents

Less: Interest

Less: Executory costs (if paid)

Principal O utstanding

Personal Property

C apital Lease s

Operating Leases

$1,584.00

$26,758.08 26,758.08 15,223.00 13,512.00 3,962.00

1,584.00 $1,584.00

$86,213.16

CAPITAL LEASES
Capital leases are generally payable in monthly installments and have terms expiring in 2004. Expenditures for fiscal year 2003 were $59,306.45 of which $3,611.72 represented interest. Total principal paid on capital leases was $55,694.73 for the fiscal year ended June 30, 2003. The interest rate on the capital lease for the bleachers was 8.0 percent. This lease expired during fiscal year 2003. Interest has not been computed on the capital leases for equipment as it has been considered immaterial. Equipment acquired under capital lease agreements had a carrying value of $6,238.40 at June 30, 2003.
Certain capital leases provide for options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms.
OPERATING LEASES
Middle Georgia College's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2005 through 2008. Certain operating leases provide for renewal options on a month-to-month basis. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the
Annual Financial Report FY 2003 (Version 1.0) 23

normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment.

Noncancellable operating lease expenditures in 2003 were $22,796.08 for equipment.

Note 10. Retirement Plans

Teachers Retirement System Of Georgia

Plan Description Middle Georgia College participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Middle Georgia College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Middle Georgia College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$630,149.14 $646,640.01 $772,296.51

Regents Retirement Plan

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.

Annual Financial Report FY 2003 (Version 1.0) 24

Funding Policy Middle Georgia College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.
Middle Georgia College and the covered employees made the required contributions of $136,153.61 (10.02%) and $67,941.21 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description Middle Georgia College participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $22,826.38 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
Middle Georgia College is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Middle Georgia College and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board
Annual Financial Report FY 2003 (Version 1.0) 25

of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Middle Georgia College, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Middle Georgia College expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Middle Georgia College (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
Annual Financial Report FY 2003 (Version 1.0) 26

Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 108 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, Middle Georgia College recognized as incurred $336,771.13 of expenditures, which was net of $166,977.49 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 27

Note 14. Natural Classifications With Functional Classifications The College's operating expenses by functional classification for FY 2003 are shown below:

Statement of Operating Expenses - Natural vs Func tional Classific ations For the Fisc al Year Ended June 30, 2003
Func tional Classific ation F Y 2003

Natural C lassification

Instruction

Research

Public Service

Academic Support

Faculty Staff B enefits P erso nal Services Travel Scho larships and Fello wships Utilities Supplies and Others Services Depreciatio n

$ 4,007,145.36 727,957.11
1,127,552.50
17,038.43 (1,401,969.70)
64,701.61 150,399.18
700.00

$ 0.00

$ 300.00 18,780.91
449.35 497.14
82,757.68

$ 106,500.00 918,350.28 240,515.38
6,311.02
12,582.09 418,160.12 59,917.87

To tal Expenses

$ 4,693,524.49

$ 0.00

$ 102,785.08

$ 1,762,336.76

Student Services
$ 46,980.90 749,235.36 186,825.78
22,841.26 (1,625.19) 13,181.77 287,368.19 4,918.95
$ 1,309,727.02

Statement of Operating Expenses - Natural vs Func tional Classific ations For the Fisc al Year Ended June 30, 2003

Natural C lassification

Institutio nal Suppo rt

P lant Operatio ns & M aintenance

Func tional Classific ation F Y 2003

Scho larships & Fello wships

A uxiliary Enterprises

Unallo cated Expenses

F ac ult y Staff B enefits P erso nal Services T rav el Scho larships and Fello wships Utilities Supplies and Others Services Depreciatio n

$ 1,561.76 1,075,323.56
747,848.42
8,304.72 1,003.00 21,410.01 411,910.69
366.67

$ 0.00 979,839.68 295,670.41 (312,783.35)
1,869.12
654,432.93 444,485.70
6,242.75

$ 0.00 2,505,486.59

$ 15,710.48 393,384.80
95,773.19 312,783.35
2,871.89 108,652.75
11,051.43 2,309,466.13
19,594.34

$ 0.00 994,966.02

To tal Expenses

$ 2,267,728.83

$ 2,069,757.24

$ 2,505,486.59

$ 3,269,288.36

$ 994,966.02

To tal Expenses
$ 4,178,198.50 4,862,871.70 2,694,635.03
0.00 59,733.58 1,211,547.45 777,359.84 4,104,547.69 1,086,706.60
$ 18,975,600.39

Annual Financial Report FY 2003 (Version 1.0) 28

NORTH GEORGIA COLLEGE & STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2003

North Georgia College & State University Dahlonega, Georgia

Nathaniel Hansford
President

Frank J. (Mac) McConnell
Vice President for Business and Finance

NORTH GEORGIA COLLEGE & STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2003
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 7 Statement of Revenues, Expenses and Changes in Net Assets............................................ 8 Statement of Cash Flows ..................................................................................................... 9 Note 1 Summary of Significant Accounting Policies ...................................................... 11 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 16 Note 3 Accounts Receivable............................................................................................. 18 Note 4 Inventories............................................................................................................. 19 Note 5 Notes/Loans Receivable........................................................................................ 19 Note 6 Capital Assets........................................................................................................ 20 Note 7 Deferred Revenue.................................................................................................. 21 Note 8 Long-Term Liabilities ........................................................................................... 21 Note 9 Lease Obligations.................................................................................................. 21 Note 10 Retirement Plans ................................................................................................. 22 Note 11 Risk Management................................................................................................ 23 Note 12 Contingencies...................................................................................................... 24 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 24 Note 14 Natural Classifications With Functional Classifications..................................... 26

NORTH GEORGIA COLLEGE & STATE UNIVERSITY Management's Discussion and Analysis

Introduction

North Georgia College & State University is one of the 34 institutions of the University System of Georgia. The University, located in Dahlonega, Georgia, was founded in 1873 and is known for its leadership programs. The University offers baccalaureate and masters degrees in a wide variety of academic disciplines as well as the education specialist degree in teacher leadership. This range of educational opportunities attracts a highly qualified faculty and a student body of more than 4,000 students each year. The institution continues to grow as shown by the comparison numbers that represent full time students and faculty.

Faculty

Students

FY2003 FY2002 FY2001

181

3,467

173

3,360

170

3,240

Overview of the Financial Statements and Financial Analysis

North Georgia College & State University is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2002 and FY 2003.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of North Georgia College & State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and noncurrent assets will be discussed in the footnotes to the financial statements.

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

Annual Financial Report FY2003 (Version 1.0) 1

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

Assets: C urrent Assets C apital Assets, net Other Assets Total Assets

June 30, 2003
$11,156,214.11 46,315,978.89 2,653,980.36 60,126,173.36

June 30, 2002
$10,858,355.12 43,057,631.39 2,883,665.79 56,799,652.30

Liabilities: C urrent Liabilities Noncurrent Liabilities Total Liabilities

3,818,604.17 391,866.31
4,210,470.48

2,905,346.52 2,905,346.52

Net Assets: Invested in C apital Assets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects Unrestricted Total Net Assets

43,835,756.06 2,536,701.39
17,162,174.68 285,096.94
(7,904,026.19) $55,915,702.88

43,334,782.37
16,862,785.93 515,429.94
(6,818,692.46) $53,894,305.78

The total assets of the institution increased by $3,326,521.06. See Note 1 in the notes to the financial statements for additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution.
The total liabilities for the year increased by $1,305,123.96. The combination of the increase in total assets of $3,326,521.06 and the increase in total liabilities of $1,305,123.96 yields an increase in total net assets of $2,021,397.10.

Annual Financial Report FY2003 (Version 1.0) 2

Statement of Revenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30, 2003

Operating Revenues Operating Expenses Operating Loss

$21,641,970.26 40,318,462.30 (18,676,492.04)

Nonoperating Revenues and Expenses

18,099,792.48

Income (Loss) Before other revenues, expenses, gains or losses

(576,699.56)

Other revenues, expenses, gains or losses

305,593.29

Increase in Net Assets

(271,106.27)

Net Assets at beginning of year, as originally reported C umulative effect of changes in accounting principle Prior Year Adjustments Net Assets at beginning of year, restated

53,894,305.78
2,292,503.37 56,186,809.15

Net Assets at End of Year

$55,915,702.88

June 30, 2002 $21,723,279.95
40,921,559.39 (19,198,279.44) 21,358,723.48
2,160,444.04 16,998,015.95 19,158,459.99 80,016,389.18 45,280,543.39 34,735,845.79 $53,894,305.78

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:

Annual Financial Report FY2003 (Version 1.0) 3

Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

Operating Revenue Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Auxiliary Other
Total Operating Revenue
Nonoperating Revenue State Appropriations Gifts Investment Income Grants and Contracts Other
Total Nonoperating Revenue
Capital Gifts and Grants State Capital Appropriations Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

June 30, 2003

June 30, 2002

$8,528,286.12 3,245,697.35 417,372.27 8,558,922.72 891,691.80
21,641,970.26

$7,702,441.83 4,190,480.64 387,725.39 9,035,326.95 407,305.14
21,723,279.95

19,409,373.00 381,335.14
(1,690,915.66) 18,099,792.48

20,626,467.00 732,126.07 130.41
21,358,723.48

305,593.29

16,998,015.95

305,593.29 $40,047,356.03

16,998,015.95 $60,080,019.38

Annual Financial Report FY2003 (Version 1.0) 4

Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003 $17,708,246.31
3,287,555.41 2,865,028.10 4,491,821.43 10,127,865.12
890,556.72 947,389.21
40,318,462.30
$40,318,462.30

June 30, 2002 $17,925,931.20
3,083,479.08 2,595,286.87 4,146,214.19 4,488,013.20
834,697.65 7,847,937.20
40,921,559.39
$40,921,559.39

Nongovernmental grants and contracts decreased in the amount of approximately ($1,080,426.07).
Revenues associated with the residential life, net of sponsored and unsponsored scholarships, category decreased approximately ($476,404.23) during the year.
The compensation and employee benefits category increased by approximately $1,566,808.68. The increase reflects a pay raise for the employees of the institution of approximately three percent with the associated fringe benefits. The increase also reflects an increased cost of health insurance for the employees of the institution.
Utilities increased by approximately $257,556.78 during the past year.
Under non-operating revenues (expenses) state appropriations decreased by approximately ($1,217,094.00).
Statement of Cash Flows
The final statement presented by the North Georgia College & State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the
Annual Financial Report FY2003 (Version 1.0) 5

institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Year Ended June 30, 2003 Condensed

Cash Provided (used) By: Operating Activities Non-capital Financing Activities Investing Activities Capital and Related Financing Activities
Net Change in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2003
($18,177,516.54) 19,786,949.02 657,773.81 (2,258,867.48)
8,338.81 8,703,552.27
$8,711,891.08

Capital Assets
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Economic Outlook
The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong. Even with a relatively flat funded year, the University was able to generate a modest increase in Net Assets. The University anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues.
_______________________ Nathaniel Hansford, President North Georgia College & State University

Annual Financial Report FY2003 (Version 1.0) 6

Statement of Net Assets

NO RTH GEORGIA C O LLEGE & STATE UNIV ERSITY

STATEMENT OF NET ASSETS

June 30, 2003

June 30, 2003

ASSETS

Current Asse ts

C a sh and C a sh Equiv a lents

$8,711,891.08

S ho rt-te rm Inv e stm e nts

49,078.65

A ccounts R ece iv able , net

626,157.11

Inv e nto rie s

1,129,599.14

O the r A sse ts

639,488.13

To ta l C urre nt A sse ts

11,156,214.11

Noncurrent Asse ts Noncurrent C ash Inv estm e nts Notes R e ceiv a ble , ne t C a pital A sse ts, net Total Noncurrent A ssets TOTAL ASSETS

1,577,911.53 1,076,068.83 46,315,978.89 48,969,959.25 60,126,173.36

LIA BILIT IE S Current Liabilities
A ccounts Pa y a ble a nd A ccrue d Lia bilities D e po sits D eferred Revenue O the r Liabilities D e po sits He ld fo r O the r O rga niza tio ns C om pensate d A bse nce s (curre nt portion)
Total C urre nt Liabilities Noncurrent Lia bilities
C om pensate d A bse nce s Long-term Liabilities
To ta l No ncurre nt Lia bilitie s TOTAL LIABILITIES

454,487.07 492,094.04 2,048,235.58
11,907.40 139,716.53 672,163.55 3,818,604.17
391,866.31
391,866.31 4,210,470.48

NET ASSETS Inv ested in C a pita l A ssets, ne t of re late d debt R e stricte d fo r No n e x p e n d a b le E x p e n d a b le C a pital Proje cts Unre stricte d TOTAL NET ASSETS

43,835,756.06
2,536,701.39 17,162,174.68
285,096.94 (7,904,026.19) $55,915,702.88

Annual Financial Report FY2003 (Version 1.0) 7

Statement of Revenues, Expenses and Changes in Net Assets

NORTH GEORGIA COLLEGE & STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2003

June 30, 2003

REVENUES

Operating Revenues

Student Tuition and Fees

$9,587,452.50

Less: Sponsored and Unsponsored Scholarships

(1,059,166.38)

Federal Appropriations

Federal Grants and Contracts

2,380,440.21

State and Local Grants and Contracts

251,188.84

Nongovernmental Grants and Contracts

614,068.30

Sales and Services of Educational Departments

417,372.27

Auxiliary Enterprises

8,558,922.72

Other Operating Revenues

891,691.80

Total Operating Revenues

21,641,970.26

EXPENSES

Operating Expenses

Salaries:

Faculty

10,666,673.19

Staff

10,497,462.42

Benefits

5,726,166.12

Other Personal Services

Travel

323,142.17

Scholarships and Fellowships

1,283,804.93

Utilities

1,578,538.40

Supplies and Other Services

(3,405,167.95)

Depreciation

13,647,843.02

Total Operating Expenses

40,318,462.30

Operating Income (loss) NONOPERATING REVENUES (EXPENSES)

(18,676,492.04)

State Appropriations

19,409,373.00

Gifts

Investment Income (endowments, auxiliary and other)

381,335.14

Interest Expense (capital assets)

Other Nonoperating Revenues

(1,690,915.66)

Net Nonoperating Revenues

18,099,792.48

Income before other revenues, expenses, gains, or loss

(576,699.56)

State Capital Appropriations

305,593.29

Capital Grants and Gifts

Federal Grants & Contracts

State Grants & Contracts

Other Grants and Contracts

Total Other Revenues

305,593.29

Increase in Net Assets NET ASSETS

(271,106.27)

Net Assets-beginning of year, as originally reported

53,894,305.78

Cumulative effect of changes in accounting principle

Prior Year Adjustments

2,292,503.37

Net Assets-beginning of year, restated

56,186,809.15

Net Assets-End of Year

$55,915,702.88

Annual Financial Report FY2003 (Version 1.0) 8

Statement of Cash Flows
NORTH GEORGIA COLLEGE & STATE UNIVERSITY STATEMENT OF CASH FLOWS
For the Year Ended June 30, 2003
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities
CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES C apital Grants and Gifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital Debt and Leases Interest Paid on C apital Debt and Leases Net C ash used by C apital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003
$9,930,635.92
3,406,653.91 393,043.52
(17,896,926.44) (21,164,135.61)
(2,342,971.31) (333,293.04) 239,495.53
2,163,819.59 2,713,278.67 1,864,834.18
286,964.32 472,279.26 1,022,967.30
71,594.40 994,243.26 (18,177,516.54)
19,409,373.00 377,576.02
19,786,949.02
3,014.65 (2,261,882.13)
(2,258,867.48)
295,000.00 362,773.81
657,773.81 8,338.81
8,703,552.27 $8,711,891.08

Annual Financial Report FY2003 (Version 1.0) 9

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating Activities
Depreciation C hange in Assets and Liabilities:
Receivables, net Inventories Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($18,676,492.04) (13,554,731.52)
13,647,843.02
63,199.81 (64,206.02) (82,965.92) 24,609.55 178,992.57 274,733.54 11,500.47
($18,177,516.54)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current Assets

$8,711,891.08 $8,711,891.08

North Georgia College and State University had no non-cash investing, non-capital financing, or capital and related financing transactions for FY2003.

Annual Financial Report FY2003 (Version 1.0) 10

NORTH GEORGIA COLLEGE & STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations North Georgia College & State University serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity North Georgia College & State University is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of North Georgia College & State University as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. North Georgia College & State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, North Georgia College & State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of
Annual Financial Report FY 2003 (Version 1.0) 11

materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
Basis of Accounting For financial reporting purposes, the University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-university transactions have been eliminated.
The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Consumable supplies are carried at the lower of cost or market on either the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis.
Annual Financial Report FY 2003 (Version 1.0) 12

Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia (and thus North Georgia College and State University) recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to North Georgia College & State University when complete. For the year ended June 30, 2003, GSFIC transferred capital additions valued at $305,593.29 to North Georgia College & State University.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net
Annual Financial Report FY 2003 (Version 1.0) 13

Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. North Georgia College & State University had accrued liability for compensated absences in the amount of $1,052,529.39 as of 7-1-2002. For FY2003, an adjustment of ($85,188.12) was posted, $800,552.48 was earned in compensated absences and employees were paid $703,863.89, for a net increase of $11,500.47. The ending balance as of 630-2003 in accrued liability for compensated absences is $1,064,029.86.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The University's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and
Annual Financial Report FY 2003 (Version 1.0) 14

Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted Total Unrestricted Net Assets

June 30, 2003
$7,914,639.14 (678,475.82) 72,747.32
(15,212,936.83) ($7,904,026.19)

When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes North Georgia College & State University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues The University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the University's financial
Annual Financial Report FY 2003 (Version 1.0) 15

statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships.
Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus North Georgia College & State University) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus North Georgia College & State University), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Annual Financial Report FY 2003 (Version 1.0) 16

Categorization of Deposits
The University's cash deposits are categorized by risk as follows:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the University or by its agent in the University's name.
Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University's name.
Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the University's name, and amounts uncollateralized.
Cash Deposits as of June 30, 2003

Cash Deposits Investment Portfolio Accounts
Total Cash Deposits

C arrying Amount
$8,385,749.14

Bank Balances
$8,385,749.14

$8,385,749.14 $8,385,749.14

Risk Categories

1

2

3

$0.00

$0.00 $8,385,749.14

$0.00

$0.00 $8,385,749.14

Categorization of Investments
The University's investments are categorized as to credit risk within the three categories described below:
Category 1 - Insured or registered, or securities held by the University or its agent in the University's name
Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name.
Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University's name.

Annual Financial Report FY 2003 (Version 1.0) 17

At June 30, 2003, the University's investments consisted of the following:

Type of Investm e nts
C om m on S tock C orporate Bonds S ecurities and C orporate O bligations

Risk C ategorie s

1

2

$495,629.23

$0.00

1,082,282.30

3 $0.00

C arrying Amount
$495,629.23
1,082,282.30

T o ta ls

$1,577,911.53

$0.00

$0.00

$1,577,911.53

Investm e nts Not S ubject to C ategorizations: B oard of R egents
S hort-Term Fund Balanced Income Fund Total Return Fund Investm e nt Portfolio A ccounts Mutual Funds R eal Estate S tate Investm ent Pool S hort-Term Investm ents
Total Investm ents

309,121.94 49,078.65
$1,936,112.12

Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool.

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2003.

S tudent Tuition and Fees A uxiliary Enterprises and Other Operating A ctivities Fede ral, S tate , and Private Funds O the r
Less A llowance for D oubtful A ccounts
Net A ccounts Receivable

June 30, 2003
$304,901.63 72,489.58
116,308.64 158,553.11 652,252.96
26,095.85
$626,157.11

Annual Financial Report FY 2003 (Version 1.0) 18

Note 4. Inventories

Inventories consisted of the following at June 30, 2003.

C entral Stores B o o k s to r e Print Services Other
Total

June 30, 2003
$54,991.04 1,071,205.10
3,403.00
$1,129,599.14

Note 5. Notes/Loans Receivable
Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2003 and 2002. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The University has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2003 the allowance for uncollectible loans was $0.00.

Annual Financial Report FY 2003 (Version 1.0) 19

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2003.

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$1,179,845.43
1,179,845.43

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

4,782,058.00 55,754,522.95
2,324,173.00 3,716,376.49
3,090,861.00
69,667,991.44

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

4,021,290.07 17,326,029.20
1,607,543.03 2,448,197.18
2,387,146.00
27,790,205.48

Total Capital Assets, Being Depreciated, Net 41,877,785.96

Capital Assets, net

$43,057,631.39

Additions
$230,333.00 1,924,378.50 2,154,711.50

Reductions $230,333.00
230,333.00

Ending Balance 6/30/2003
$1,179,845.43 1,924,378.50 3,104,223.93

12,091,572.00 2,815,082.00 974,176.57
127,470.00
16,008,300.57

2,207,864.00 12,294,895.00
2,040,825.00 409,752.03
14,132.00
16,967,468.03

2,574,194.00 55,551,199.95
3,098,430.00 4,280,801.03
0.00 3,204,199.00
0.00 68,708,823.98

211,797.75 7,974,846.78
579,192.35 422,167.07
110,341.00
9,298,344.95
6,709,955.62
$8,864,667.12

2,255,685.90 8,597,842.57
620,348.91 103,472.03
14,132.00
11,591,481.41
5,375,986.62
$5,606,319.62

1,977,401.92 16,703,033.41
1,566,386.47 2,766,892.22
0.00 2,483,355.00
0.00 25,497,069.02
43,211,754.96
$46,315,978.89

Annual Financial Report FY 2003 (Version 1.0) 20

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2003.

P re pa id Tuition a nd Fe e s Research O the r D e fe rre d R e v e nue
Tota ls

June 30, 2003 $1,722,900.93
325,334.65 $2,048,235.58

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2003 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2002
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2003

$0.00

$0.00

Current Portion
$0.00

Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total

1,052,529.39 1,052,529.39

800,552.48 800,552.48

789,052.01 789,052.01

1,064,029.86 0.00
1,064,029.86

672,163.55 672,163.55

Total Long Term Obligations

$1,052,529.39 $800,552.48

$789,052.01 $1,064,029.86

$672,163.55

(a) The beginning balance includes the amount reported as current in FY 2002 and reclassified as long-term in FY 2003

Note 9. Lease Obligations
North Georgia College & State University had no capital or operating lease agreements as of June 20, 2003.

Annual Financial Report FY 2003 (Version 1.0) 21

Note 10. Retirement Plans

Teachers Retirement System Of Georgia

Plan Description North Georgia College & State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of North Georgia College & State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. North Georgia College & State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$1,231,911.49 $1,265,154.15 $1,432,193.53

Regents Retirement Plan

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.

Funding Policy North Georgia College and State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation.

Annual Financial Report FY 2003 (Version 1.0) 22

Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.
North Georgia College & State University and the covered employees made the required contributions of $557,683.85 (10.02%) and $278,306.99 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description North Georgia College & State University participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $51,326.65 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
North Georgia College & State University is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. North Georgia College & State University and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of
Annual Financial Report FY 2003 (Version 1.0) 23

$2,000,000.00 per person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. North Georgia College & State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although North Georgia College & State University expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against North Georgia College & State University (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
Note 13. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the
Annual Financial Report FY 2003 (Version 1.0) 24

group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 184 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, North Georgia College & State University recognized as incurred $679,662.40 of expenditures, which was net of $212,801.74 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 25

Note 14. Natural Classifications With Functional Classifications The University's operating expenses by functional classification for FY2003 are shown below:

Statement of Operating Expenses - Natural vs Func tional Classific ations For the Fisc al Y ear Ended June 30, 2003
Func tional Classific ation F Y 2003

Natural C lassification

Instruction

Research

Public S e r v ic e

Academic Support

F ac ult y Staff B enefits P erso nal Services T rav el Scho larships and Fello wships Ut ilit ies Supplies and Others Services Depreciatio n

$ 10,534,252.34 1,903,427.87 2,647,179.14
201,829.56 113,631.26 138,985.70 2,006,625.47 162,314.97

$ 0.00

$ 0.00

$ 44,720.92 2,002,996.78
461,057.06
32,269.83
76,000.22 534,050.25 136,460.35

To tal Expenses

$ 17,708,246.31

$ 0.00

$ 0.00

$ 3,287,555.41

S tud e nt S e r v ic e s
$ 0.00 1,723,551.85
403,473.12
37,748.24 1,400.00
46,696.13 641,073.21
11,085.55
$ 2,865,028.10

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003

Natural Classification

Institutional Support

Plant Operations & Maintenance

Functional Classification FY2003

Scholarships & Fellowships

Auxiliary Enterprises

Unallocated Expenses

Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation

$25,000.00 2,135,005.89 1,464,424.62
33,016.94
44,895.76 664,173.95 125,304.27

$0.00 1,664,024.25
519,866.64 (682,902.58)
3,577.31
1,140,520.56 722,881.11
6,759,897.83

$0.00
890,481.72 75.00

$62,699.93 1,068,455.78
230,165.54 682,902.58
14,700.29 278,291.95 131,440.03 (7,974,046.94) 6,452,780.05

$0.00

Total Expenses

$4,491,821.43

$10,127,865.12

$890,556.72

$947,389.21

$0.00

Total Expenses
$10,666,673.19 10,497,462.42
5,726,166.12 0.00
323,142.17 1,283,804.93 1,578,538.40 (3,405,167.95) 13,647,843.02
$40,318,462.30

Annual Financial Report FY 2003 (Version 1.0) 26

SAVANNAH STATE UNIVERSITY
Financial Report
June 30, 2003

President Carlton E. Brown

Savannah State University Savannah, Georgia
Vice President Business & Finance Arthur Moncrief

SAVANNAH STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2003
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 8 Statement of Revenues, Expenses and Changes in Net Assets............................................ 9 Statement of Cash Flows ................................................................................................... 10 Note 1 Summary of Significant Accounting Policies ...................................................... 12 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 17 Note 3 Accounts Receivable............................................................................................. 19 Note 4 Inventories............................................................................................................. 20 Note 5 Notes/Loans Receivable........................................................................................ 20 Note 6 Capital Assets........................................................................................................ 21 Note 7 Deferred Revenue.................................................................................................. 22 Note 8 Long-Term Liabilities ........................................................................................... 22 Note 9 Lease Obligations.................................................................................................. 22 Note 10 Retirement Plans ................................................................................................. 23 Note 11 Risk Management................................................................................................ 24 Note 12 Contingencies...................................................................................................... 25 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 25 Note 14 Natural Classifications With Functional Classifications..................................... 27

SAVANNAH STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Savannah State University is one of the 34 institutions of the University System of Georgia. The University, located in Savannah, Georgia, was founded in 1890 as a department of the State University for the education and training of Negro students. Savannah State University now serves a diverse student population as a senior university of the University System of Georgia. The University serves a primarily African American student population, enriched by a diversity of traditional and nontraditional students from other countries, cultures, and races. The educational goal is realized through program offerings in the College of Business Administration, the College of Liberal Arts and Social Sciences, and the College of Sciences and Technology, which lead to baccalaureate and master's degrees. This wide range of educational opportunities attracts a highly qualified faculty and a student body of around 2,100 students each year. The institution continues to grow as shown by the comparison numbers that follows:

Faculty

Students

FY2003 FY2002 FY2001

122

2,071

135

1,831

116

1,688

Overview of the Financial Statements and Financial Analysis

Savannah State University is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2002 and FY 2003.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Savannah State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements.

Annual Financial Report FY 2003 (Version 1.0) 1

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

Assets: C urrent Assets C apital Assets, net Other Assets Total Assets

June 30, 2003
$4,510,446.66 35,766,881.75
2,342,338.00 42,619,666.41

June 30, 2002
$5,613,252.42 31,137,164.01
1,285,010.66 38,035,427.09

Liabilities: C urrent Liabilities Noncurrent Liabilities Total Liabilities

1,905,722.49 547,373.78
2,453,096.27

2,305,358.96 2,305,358.96

Net Assets: Invested in C apital Assets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects Unrestricted Total Net Assets

35,766,881.75 1,170,405.57 1,048,516.19
2,180,766.63 $40,166,570.14

31,137,164.01 1,104,605.19 916,738.19
2,571,560.74 $35,730,068.13

The total assets of the institution increased by $4,584,239.32. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $4,629,717.74 in capital assets, net of accumulated depreciation. See Note 1 in the notes to the financial statements for additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets. The current assets category showed a decrease of $1,102,805.76. This decrease was the result of the University System's attempt to be consistent in the classification of investment pools. The other asset category, showed an increase during the year of $1,057,327.34. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution.
Annual Financial Report FY 2003 (Version 1.0) 2

The total liabilities of the institution for the year increased by $147,737.31. The primary cause for the increase was a combination of an increase in current liabilities and an accompanying decrease in noncurrent liabilities. The combination of the increase in total assets of $4,584,239.32 and the increase in total liabilities of $147,737.31 yields an increase in total net assets of $4,436,502.01. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $4,629,717.74.

Statement of Revenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30, 2003

June 30, 2002

Operating Revenues Operating Expenses Operating Loss

$31,903,251.65 52,872,342.99 (20,969,091.34)

$29,369,433.22 49,485,609.15 (20,116,175.93)

Nonoperating Revenues and Expenses

19,516,755.08

20,791,108.90

Income (Loss) Before other revenues, expenses, gains or losses

(1,452,336.26)

674,932.97

Other revenues, expenses, gains or losses

3,576,236.15

Increase in Net Assets

2,123,899.89

674,932.97

Net Assets at beginning of year, as originally reported Cumulative effect of changes in accounting principle Prior Year Adjustments Net Assets at beginning of year, restated

35,730,068.13
2,312,602.12 38,042,670.25

83,412,335.20 48,357,200.04
35,055,135.16

Net Assets at End of Year

$40,166,570.14

$35,730,068.13

Annual Financial Report FY 2003 (Version 1.0) 3

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:
Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

Operating Revenue Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Auxiliary Other
Total Operating Revenue
Nonoperating Revenue State Appropriations Gifts Investment Income Grants and Contracts Other
Total Nonoperating Revenue
Capital Gifts and Grants State Capital Appropriations Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

June 30, 2003

June 30, 2002

$3,209,849.77 22,169,046.93
136,560.90 6,116,451.99
271,342.06
31,903,251.65

$2,615,385.49 20,933,335.19
198,003.00 5,339,673.27
283,036.27
29,369,433.22

17,633,886.00 55,848.94 59,808.09 0.00
1,767,212.05
19,516,755.08

19,986,664.00 5,750.00
621,857.21 0.00
176,837.69
20,791,108.90

3,576,236.15

3,576,236.15 $54,996,242.88

0.00 $50,160,542.12

Annual Financial Report FY 2003 (Version 1.0) 4

Expenses (By Functional Classification For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003
$10,570,560.81 1,639,106.92 2,428,313.13 3,420,662.24 2,516,161.62 6,144,916.90 7,959,196.67
12,296,079.49 5,897,345.21
52,872,342.99
$52,872,342.99

June 30, 2002
$11,131,742.81 1,687,530.42 2,435,250.63 3,669,071.58 2,483,209.90 5,623,907.77 6,071,185.64
11,265,627.96 5,118,082.44
49,485,609.15
$49,485,609.15

Operating Revenues showed an increase of $2,533,818.43. This increase was primarily caused by increases in revenues associated with the tuition fees, net of sponsored and unsponsored scholarships, federal grants and contracts, and auxiliary enterprises. Revenues associated with tuition and fees increased approximately $594,464.28 during the year. This increase reflects an increase in enrollment. For fiscal year 2003 student enrollment increased by 240 students or 13%. Federal Grants and Contracts revenue showed an increase of $1,205,708.54. Auxiliary Services revenue showed an increase of $776,778.72.
The compensation and employee benefits category increased by approximately $558,260.66. The increase reflects a pay raise for the employees of the institution of approximately three percent with associated fringe benefits. The increase also reflects an increase in the cost of health insurance for the employees of the institution.
Utilities decreased by approximately ($33,046.51) during the past year. The decrease was primarily associated with a decrease in electricity costs.
.

Annual Financial Report FY 2003 (Version 1.0) 5

Statement of Cash Flows
The final statement presented by the Savannah State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Year Ended June 30, 2003, Condensed

Cash Provided (used) By: Operating Activities Non-capital Financing Activities Investing Activities Capital and Related Financing Activities
Net Change in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2003
($18,581,377.79) 18,033,271.76 59,808.09 (1,001,635.29)
(1,489,933.23) 1,750,495.60
$260,562.37

Capital Assets
Savannah State University completed major renovations to the Drew Griffith Academic Building in FY2003. The $3,576,236.15 for this project was funded by the Georgia State Finance and Investment Commission (GSFIC). Other funding by the GSFIC included $30,875.62 for equipment. Projected funding by GSFIC for FY2003 will be approximately the same.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Economic Outlook
During fiscal year 2003, the University, as well as most state agencies of Georgia, received notifications of reductions in state appropriations. Those reductions did occur for the University beginning in the fall semester amounting to approximately 5.86% or $963,235 from the
Annual Financial Report FY 2003 (Version 1.0) 6

originally approved annual budget. Subsequent reductions occurred at rates of 3%, excluding the budget for Instruction, and 2% of the total budget, resulting in additional reductions in state appropriations of $212,063 and $372,289, respectively. Given the reductions in state appropriations and the potential for further reductions in out years, the University is developing several scenarios to cut costs while preserving the ability to deliver mission-critical activities of instruction, research and public service. The University anticipates the next few fiscal years to be much like fiscal year 2003 and will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues. _______________________ Carlton E. Brown, President Savannah State University
Annual Financial Report FY 2003 (Version 1.0) 7

Statement of Net Assets
SAV ANNAH STATE UNIV ERSITY STATEMENT OF NET ASSETS June 30, 2003
ASSETS Current Asse ts C a sh and C a sh Equiv a lents S ho rt-te rm Inv e stm e nts A ccounts R ece iv able , net Inv e nto rie s O the r A sse ts To ta l C urre nt A sse ts
Noncurrent Asse ts Noncurrent C ash Inv estm e nts Notes R e ceiv a ble , ne t C a pital A sse ts, net Total Noncurrent A ssets TOTAL ASSETS
LIA BILIT IE S Current Liabilities A ccounts Pa y a ble a nd A ccrue d Lia bilities D e po sits D eferred Revenue O the r Liabilities D e po sits He ld fo r O the r O rga niza tio ns C om pensate d A bse nce s (curre nt portion) Total C urre nt Liabilities Noncurrent Lia bilities C om pensate d A bse nce s Long-term Liabilities To ta l No ncurre nt Lia bilitie s TOTAL LIABILITIES

June 30, 2003
$37,327.02 495,569.38 3,222,904.49 735,729.86
18,915.91 4,510,446.66
223,235.35 1,295,585.02
823,517.63 35,766,881.75 38,109,219.75 42,619,666.41
484,287.44 57,595.00
145,931.10 13,996.94
663,932.23 539,979.78 1,905,722.49
547,373.78
547,373.78 2,453,096.27

NET ASSETS Inv ested in C a pita l A ssets, ne t of re late d debt R e stricte d fo r No n e x p e n d a b le E x p e n d a b le C a pital Proje cts Unre stricte d TOTAL NET ASSETS

35,766,881.75
1,170,405.57 1,048,516.19
2,180,766.63 $40,166,570.14

Annual Financial Report FY 2003 (Version 1.0) 8

Statement of Revenues, Expenses and Changes in Net Assets

SAVANNAH STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2003
June 30, 2003

REVENUES

Operating Revenues

Student Tuition and Fees

$6,628,446.26

Less: Sponsored and Unsponsored Scholarships

(3,418,596.49)

Federal Appropriations

Federal Grants and Contracts

21,678,490.60

State and Local Grants and Contracts

155,363.64

Nongovernmental Grants and Contracts

335,192.69

Sales and Services of Educational Departments

136,560.90

Auxiliary Enterprises

6,116,451.99

Other Operating Revenues

271,342.06

Total Operating Revenues

31,903,251.65

EXPENSES

Operating Expenses

Salaries:

Faculty Staff

7,400,080.92 10,941,460.95

Benefits Other Personal Services

5,347,344.29 2,496.00

Travel

778,398.77

Scholarships and Fellowships

13,454,470.38

Utilities

1,937,932.99

Supplies and Other Services Depreciation

11,199,532.66 1,810,626.03

Total Operating Expenses

52,872,342.99

Operating Income (loss) NONOPERATING REVENUES (EXPENSES)

(20,969,091.34)

State Appropriations

17,633,886.00

Gifts

55,848.94

Investment Income (endowments, auxiliary and other) Interest Expense (capital assets)

59,808.09

Other Nonoperating Revenues

1,767,212.05

Net Nonoperating Revenues

19,516,755.08

Income before other revenues, expenses, gains, or loss

(1,452,336.26)

State Capital Appropriations

3,576,236.15

Capital Grants and Gifts

Federal Grants & Contracts

State Grants & Contracts

Other Grants and Contracts

Total Other Revenues

3,576,236.15

Increase in Net Assets NET ASSETS

2,123,899.89

Net Assets-beginning of year, as originally reported

35,730,068.13

Cumulative effect of changes in accounting principle

Prior Year Adjustments

2,312,602.12

Net Assets-beginning of year, restated

38,042,670.25

Net Assets-End of Year

Annual Financial Report FY 2003 (Version 1.0) 9

$40,166,570.14

Statement of Cash Flows
SAVANNAH STATE UNIVERSITY STATEMENT OF CASH FLOWS
For the Year Ended June 30, 2003
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales and Services of Education Department Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities
CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES C apital Grants and Gifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital Debt and Leases Interest Paid on C apital Debt and Leases Net C ash used by C apital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003
$3,187,380.46
21,932,135.57 136,560.90
(20,088,037.75) (18,566,261.62) (13,454,470.38)
(94,608.00) 57,166.69
1,080,995.50 1,306,677.20 1,906,365.09
58,587.29 339,412.90 1,369,168.22
33,639.79 2,213,910.35 (18,581,377.79)
17,633,886.00 343,536.82 55,848.94
18,033,271.76
3,576,236.25
(4,577,871.54)
(1,001,635.29)
59,808.09
59,808.09 (1,489,933.23) 1,750,495.60
$260,562.37

Annual Financial Report FY 2003 (Version 1.0) 10

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating Activities
Depreciation C hange in Assets and Liabilities:
Receivables, net Inventories Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($20,969,091.34)
3,525,792.31
(342,161.13) (68,857.38) (13,837.01)
(192,967.52) (145,931.10) (402,515.18)
28,190.56
($18,581,377.79)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current Assets

$37,327.02 223,235.35 $260,562.37

Savannah State University had no transactions to report under Non-Cash Investing, Non-Capital Financing, and Capital and Related-Financing Transactions.

Annual Financial Report FY 2003 (Version 1.0) 11

SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations Savannah State University serves the state, and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity Savannah State University is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Savannah State University as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Savannah State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Savannah State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of
Annual Financial Report FY 2003 (Version 1.0) 12

materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
Basis of Accounting For financial reporting purposes, the University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-university transactions have been eliminated.
The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Consumable supplies are carried at the lower of cost or market on either the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis.
Annual Financial Report FY 2003 (Version 1.0) 13

Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Savannah State University when complete. For the year ended June 30, 2003, GSFIC transferred capital additions valued at $3,576,236.15 to Savannah State University.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Annual Financial Report FY 2003 (Version 1.0) 14

Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Savannah State University had accrued liability for compensated absences in the amount of $1,059,163.00 as of 7-1-2002. For FY2003 $776,825.49 was earned in compensated absences and employees were paid $662,981.79. Also in FY2003 there was an $85,653.14 reduction to compensated absences as the result of FY2002 audit adjustment. The ending balance as of 6-30-2003 in accrued liability for compensated absences is $1,087,353.56, for a net increase of $28,190.56.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The University's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet
Annual Financial Report FY 2003 (Version 1.0) 15

current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted Total Unrestricted Net Assets

June 30, 2003
$1,044,177.58 1,779,270.00 682,744.40 (1,325,425.35)
$2,180,766.63

When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes Savannah State University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues The University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students' behalf.
Annual Financial Report FY 2003 (Version 1.0) 16

Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships.
Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus Savannah State University) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies, which allow agencies of the State of Georgia (and thus Savannah State University), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Annual Financial Report FY 2003 (Version 1.0) 17

Categorization of Deposits

The University's cash deposits are categorized by risk as follows:

Category 1 -

Amounts covered by depository insurance or collateralized with securities (at fair value) held by the University or by its agent in the University's name.

Category 2 -

Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University's name.

Category 3 -

Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the University's name, and amounts uncollateralized.

Cash Deposits as of June 30, 2003

C ash Deposits Investment Portfolio Accounts
Total C ash Deposits

C arrying Amount
$258,685.19

Bank Balances
$2,335,227.69

Risk C ategories

1

2

$2,335,227.69

$0.00

$258,685.19

$2,335,227.69 $2,335,227.69

$0.00

3 $0.00
$0.00

Categorization of Investments

The University's investments are categorized as to credit risk within the three categories described below:

Category 1 -

Insured or registered, or securities held by the University or its agent in the University's name

Category 2 -

Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name.

Category 3 -

Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University's name.

Annual Financial Report FY 2003 (Version 1.0) 18

At June 30, 2003, the University's investments consisted of the following:

Type of Investments
C ommon Stock C orporate Bonds Securities and C orporate O b lig a tio n s

Risk C ategories

1

2

$0.00

$0.00

3 $0.00

C arrying Amount
$0.00 0.00 0.00

T o ta ls

$0.00

$0.00

$0.00

$0.00

Investments Not Subject to C ategorizations: Board of Regents
Short-Term Fund Balanced Income Fund Total Return Fund Investment Portfolio Accounts Mutual Funds Real Estate State Investment Pool Short-Term Investments
Total Investments

1,295,585.02 0.00
495,569.38 $1,791,154.40

Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool.
Note 3. Accounts Receivable
Accounts receivable consisted of the following at June 30, 2003.

Student Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal, State, and Private Funds O th e r
Less Allowance for Doubtful Accounts
Net Accounts Receivable

June 30, 2003
$478,963.02 188,494.26
1,515,935.01 1,077,710.39 3,261,102.68
38,198.19
$3,222,904.49

Annual Financial Report FY 2003 (Version 1.0) 19

Note 4. Inventories

Inventories consisted of the following at June 30, 2003.
June 30, 2003

B o o k sto re Fo o d S e rv ice s P hy sica l P la nt O the r
T o ta l

$682,744.40 0.00
47,608.06 5,377.40
$735,729.86

Note 5. Notes/Loans Receivable
Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2003 and 2002. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education.

Annual Financial Report FY 2003 (Version 1.0) 20

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2003.

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$575,975.16
575,975.16

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

42,572,957.00 2,520,259.00 5,550,043.97
5,800,592.55 55,285.00
56,499,137.52

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

17,877,321.44 917,871.73
3,093,730.94
4,047,377.30 1,647.26
25,937,948.67

Total Capital Assets, Being Depreciated, Net 30,561,188.85

Capital Assets, net

$31,137,164.01

Additions $0.00 0.00

Reductions $0.00 0.00

Ending Balance 6/30/2003
$575,975.16
575,975.16

3,559,397.89 1,014,791.07
129,041.78 4,703,230.74

6,057.58 611,939.03
15,911.40 633,908.01

0.00 46,126,297.31
2,520,259.00 5,952,896.01
0.00 5,913,722.93
55,285.00 60,568,460.25

1,091,983.52 117,898.44 485,335.60
239,110.67 1,382.13
1,935,710.36

1,897,083.78 103,577.01 74,489.71
420,651.91 302.96
2,496,105.37

0.00 17,072,221.18
932,193.16 3,504,576.83
0.00 3,865,836.06
2,726.43 25,377,553.66

2,767,520.38 (1,862,197.36) 35,190,906.59

$2,767,520.38 ($1,862,197.36) $35,766,881.75

Annual Financial Report FY 2003 (Version 1.0) 21

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2003.

P re p a id T uitio n a nd Fe e s Research O the r D e fe rre d R e v e nue
T o ta ls

June 30, 2003 $139,101.80 6,829.30 $145,931.10

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2003 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2002
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2003

$0.00

$0.00

Current Portion
$0.00

Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total
Total Long Term Obligations

1,059,163.00

776,825.49

1,059,163.00

776,825.49

$1,059,163.00 $776,825.49

748,634.93 748,634.93

1,087,353.56 0.00
1,087,353.56

$748,634.93 $1,087,353.56

539,979.78 539,979.78 $539,979.78

(a) The beginning balance includes the amount shown as current in FY2002 and reclassified as long-term in FY2003.

Note 9. Lease Obligations
Savannah State University is not obligated under any operating leases or capital leases for the use or acquisition of real property (land, buildings, and office facilities) and equipment.

Annual Financial Report FY 2003 (Version 1.0) 22

Note 10. Retirement Plans

Teachers Retirement System Of Georgia

Plan Description Savannah State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Savannah State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Savannah State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$1,343,144.21 $1,404,295.15 $1,452,846.34

Regents Retirement Plan
Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.
Funding Policy Savannah State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statue and as advised by their independent actuary. The employer contributes 9.24% of the participating employee's earnable compensation. Employees contribute
Annual Financial Report FY 2003 (Version 1.0) 23

5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.
Savannah State University and the covered employees made the required contributions of $1,343,144.21 (10.02%) and $727,797.41 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description Savannah State University participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $38,004.70 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
Savannah State University is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Savannah State University and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue
Annual Financial Report FY 2003 (Version 1.0) 24

Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Savannah State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditure, which is disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Savannah State University expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Savannah State University (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
Note 13. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University
Annual Financial Report FY 2003 (Version 1.0) 25

System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 157 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, Savannah State University recognized as incurred $580,491.44 of expenditures, which was net of $270,168.90 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 26

Note 14. Natural Classifications With Functional Classifications The University's operating expenses by functional classification for FY2003 are shown below:

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003
Functional Classification FY2003

Natural C lassification

Instruction

Research

Public Service

Academic Support

Faculty Staff B enefits P erso nal Services Travel Scho larships and Fello wships Utilities Supplies and Others Services Depreciatio n

$ 7,128,228.02 858,564.74
2,017,970.38
40,224.26 189,494.14 104,567.26 275,082.06 (43,570.05)

$ 137,482.00 420,019.17 109,489.16
71,138.00 256,411.50
15,004.14 634,004.00
(4,441.05)

$ 44,824.50 1,189,919.27 237,729.58
45,814.70 179,712.58 17,389.24 712,923.26

$ 81,011.40 2,073,904.97
528,515.70
64,218.00 7,898.30 78,880.17 595,746.30 (9,512.60)

To tal Expenses

$ 10,570,560.81

$ 1,639,106.92

$ 2,428,313.13

$ 3,420,662.24

Student Services
$ 5,150.00 1,367,018.52 373,667.76
84,072.25 39,300.00 39,082.40 608,356.76
(486.07)
$ 2,516,161.62

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003

Natural Classification

. Institutional Suppo rt

P lant Operatio ns & M aintenance

Functional Classification FY2003

Scho larships & Fellowships

Auxiliary Enterprises

Unallocated Expenses

Faculty Staff B enefit s Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciatio n

$ 3,000.00 2,761,474.18 1,471,605.62
2,496.00 110,751.93
61,237.95 1,749,563.02
(15,211.80)

$ 0.00 1,465,204.53
421,460.30 (264,682.46)
7,809.54
1,467,692.33 2,815,652.64 2,046,059.79

$ 0.00 12,296,079.49

$ 385.00 805,355.57 186,905.79 264,682.46 354,370.09 485,574.37 154,079.50 3,808,204.62 (162,212.19)

$ 0.00

Total Expenses

$6,144,916.90

$ 7,959,196.67

$ 12,296,079.49

$5,897,345.21

$ 0.00

To t al Expenses
$ 7,400,080.92 10,941,460.95 5,347,344.29 2,496.00 778,398.77 13,454,470.38 1,937,932.99 11,199,532.66 1,810,626.03
$ 52,872,342.99

Annual Financial Report FY 2003 (Version 1.0) 27

Skidaway Institute of Oceanography
Financial Report
For the Year Ended June 30, 2003

SKIDAWAY INSTITUTE OF OCEANOGRAPHY Savannah, Georgia

James G. Sanders
Director

Marc Mascolo
Assistant Director

SKIDAWAY INSTITUTE OF OCEANOGRAPHY ANNUAL FINANCIAL REPORT FY 2003
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 7 Statement of Revenues, Expenses and Changes in Net Assets............................................ 8 Statement of Cash Flows ..................................................................................................... 9 Note 1 Summary of Significant Accounting Policies ...................................................... 11 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 16 Note 3 Accounts Receivable............................................................................................. 18 Note 4 Inventories............................................................................................................. 18 Note 5 Notes/Loans Receivable........................................................................................ 18 Note 6 Capital Assets........................................................................................................ 19 Note 7 Deferred Revenue.................................................................................................. 20 Note 8 Long-Term Liabilities ........................................................................................... 20 Note 9 Lease Obligations.................................................................................................. 21 Note 10 Retirement Plans ................................................................................................. 22 Note 11 Risk Management................................................................................................ 23 Note 12 Contingencies...................................................................................................... 24 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 24 Note 14 Natural Classifications With Functional Classifications..................................... 26

SKIDAWAY INSTITUTE OF OCEANOGRAPHY
Management's Discussion and Analysis
Introduction
The Skidaway Institute of Oceanography is a unique, multidisciplinary institute, within the University System of Georgia, dedicated to furthering our understanding of marine and environmental sciences. Located sixteen miles southeast of the city of Savannah on the north end of Skidaway Island, the Institute offers easy access to the barrier islands, estuaries, and continental shelf of the southeastern U.S. as well as the open ocean. The Institute conducts leading edge research on marine and coastal systems, trains tomorrow's marine scientists, serves as a gateway to marine environments and integrates University System marine programs. It is committed to excellence in research and education and to the communication of our understanding of marine systems. The goal of the Institute is to create a more knowledgeable citizen capable of appreciating coastal natural environments and the conditions required to sustain them while capitalizing on coastal economic opportunities.
Overview of the Financial Statements and Financial Analysis
Skidaway Institute of Oceanography is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the Institute's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2002 and FY 2003.
Statement of Net Assets
The Statement of Net Assets presents the assets, liabilities, and net assets of the Institute as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Skidaway Institute of Oceanography. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and noncurrent), and Net Assets (Assets minus Liabilities). The difference between current and noncurrent assets will be discussed in the footnotes to the financial statements.
From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.
Annual Financial Report FY 2003 (Version 1.0) 1

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

Assets: C urrent Assets C apital Assets, net Other Assets Total Assets

June 30, 2003
$1,395,342.78 6,581,098.95
7,976,441.73

June 30, 2002
$1,441,745.25 5,891,498.42
7,333,243.67

Liabilities: C urrent Liabilities Noncurrent Liabilities Total Liabilities

1,641,157.71 563,594.05
2,204,751.76

1,326,472.40 568,230.35
1,894,702.75

Net Assets: Invested in C apital Assets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects Unrestricted Total Net Assets

6,137,228.00
(365,538.03) $5,771,689.97

5,372,492.82
66,048.10 $5,438,540.92

The total assets of the institute increased by $643,198.06. See Note 1 in the notes to the financial statements for additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets. The total liabilities for the year increased $310,049.01. The primary cause for the increase was in current liabilities, primarily $314,685.31 in deferred revenue.
Statement of Revenues, Expenses and Changes in Net Assets
Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other
Annual Financial Report FY 2003 (Version 1.0) 2

revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

Operating Revenues Operating Expenses Operating Loss

June 30, 2003
$4,964,830.22 7,726,781.67 (2,761,951.45)

June 30, 2002
$3,737,523.74 6,266,186.03 (2,528,662.29)

Nonoperating Revenues and Expenses

2,759,593.62

2,690,783.52

Income (Loss) Before other revenues, expenses, gains or losses

(2,357.83)

162,121.23

Other revenues, expenses, gains or losses

277,000.00

Increase in Net Assets

(2,357.83)

439,121.23

Net Assets at beginning of year, as originally reported Cumulative effect of changes in accounting principle Prior Year Adjustments Net Assets at beginning of year, restated

5,438,540.92
335,506.88 5,774,047.80

13,826,034.43 (8,826,614.74)
4,999,419.69

Net Assets at End of Year

$5,771,689.97

$5,438,540.92

The Statement of Revenues, Expenses, and Changes in Net Assets reflect a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:

Annual Financial Report FY 2003 (Version 1.0) 3

Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

Operating Revenue Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Auxiliary Other
Total Operating Revenue
Nonoperating Revenue State Appropriations Gifts Investment Income Grants and Contracts Other
Total Nonoperating Revenue
Capital Gifts and Grants State Capital Appropriations Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

June 30, 2003
$0.00 3,867,009.25
135,832.00 46,871.39
915,117.58 4,964,830.22
2,171,255.00
624,692.71 2,795,947.71
0.00 $7,760,777.93

June 30, 2002
$0.00 3,093,387.28
87,016.80 38,733.44 518,386.22 3,737,523.74
2,292,476.42 12,097.89
277,000.00 429,011.69 3,010,586.00
0.00 $6,748,109.74

Annual Financial Report FY 2003 (Version 1.0) 4

Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003 $24,598.92
4,576,401.64 715,983.49 953,115.05
1,070,747.87 40,542.89
345,391.81 7,726,781.67
36,354.09 $7,763,135.76

June 30, 2002 $0.00
3,354,872.58 662,718.56 798,798.19
1,317,139.23 26,486.41
106,171.06 6,266,186.03
42,802.48 $6,308,988.51

The compensation and employee benefits category increased by approximately $428,033.60. The majority of the increase reflects an increase in the cost of health insurance for the employees of the institution.
Utilities decreased by approximately ($109,394.23) during the past year. The decrease was primarily associated with institute wide cost cutting efforts.
Under non-operating revenues (expenses) state appropriations decreased by ($121,221.42). This was due to the continued downturn in the economy and the resulting mandatory statewide cutbacks.
Statement of Cash Flows
The final statement presented by the Skidaway Institute of Oceanography is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the
Annual Financial Report FY 2003 (Version 1.0) 5

purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Year Ended June 30, 2003, Condensed

Cash Provided (used) By: Operating Activities Non-capital Financing Activities Investing Activities Capital and Related Financing Activities
Net Change in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2003
($1,807,033.55) 2,184,593.13
(387,789.02)
(10,229.44) 74,531.76
$64,302.32

Capital Assets
The Institute had no significant capital asset additions for facilities in fiscal year 2003.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Economic Outlook
The Institute is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The Institute's overall financial position is strong. Even with a relatively flat funded year, the Institute was able to generate a modest increase in Net Assets. The Institute anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the Institute's ability to react to unknown internal and external issues.

________________________ James G. Sanders, Director Skidaway Institute of Oceanography

Annual Financial Report FY 2003 (Version 1.0) 6

Statement of Net Assets

Skid a wa y Ins titute o f O c e a no g ra p hy

STATEMENT OF NET ASSETS

June 30, 2003

June 30, 2003

ASSETS

Current Asse ts

C a sh a nd C a sh Equiv a le nts

$64,302.32

S ho rt-te rm Inv e stm e nts

A cco unts R e ce iv a ble , ne t

1,305,641.41

Inv e nto rie s

O the r A sse ts

25,399.05

To ta l C urre nt A sse ts

1,395,342.78

Noncurre nt Asse ts Noncurrent C ash Inv e stm e nts Note s R e ce iv a ble , ne t C a pita l A sse ts, ne t To ta l No ncurre nt A sse ts TOTAL ASSETS

6,581,098.95 6,581,098.95 7,976,441.73

LIA BILIT IE S Current Lia bilitie s
A cco unts P a y a ble a nd A ccrue d Lia bilitie s D e po sits D eferred Revenue O the r Lia bilitie s D e po sits He ld for O the r O rga niza tio ns C o m pe nsa te d A bse nce s (curre nt po rtio n)
To ta l C urre nt Lia bilitie s Noncurre nt Lia bilitie s
C om pe nsa te d A bse nce s Long-te rm Lia bilitie s
To ta l No ncurre nt Lia bilitie s TOTAL LIABILITIES

(277.50)
1,364,987.98 80,850.81
195,596.42 1,641,157.71
200,573.91 363,020.14 563,594.05 2,204,751.76

NET ASSETS Inv e ste d in C a pita l A sse ts, ne t o f re la te d de bt R e stricte d fo r Nonex pendable Ex pendable C a pita l P ro je cts Unre stricte d TOTAL NET ASSETS

6,137,228.00
(365,538.03) $5,771,689.97

Annual Financial Report FY 2003 (Version 1.0) 7

Statement of Revenues, Expenses and Changes in Net Assets

Skidaway Institute of Oceanography STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2003

June 30, 2003

REVENUES

Operating Revenues

Student Tuition and Fees

$0.00

Less: Sponsored and Unsponsored Scholarships

Federal Appropriations

Federal Grants and Contracts

2,743,313.82

State and Local Grants and Contracts

775,633.69

Nongovernmental Grants and Contracts

348,061.74

Sales and Services of Educational Departments

135,832.00

Auxiliary Enterprises

46,871.39

Other Operating Revenues

915,117.58

Total Operating Revenues

4,964,830.22

EXPENSES

Operating Expenses

Salaries:

Faculty Staff

1,202,196.97 2,398,817.24

Benefits Other Personal Services

964,366.30

Travel

172,828.82

Scholarships and Fellowships

Utilities

243,434.89

Supplies and Other Services Depreciation

2,136,441.59 608,695.86

Total Operating Expenses

7,726,781.67

Operating Income (loss) NONOPERATING REVENUES (EXPENSES)

(2,761,951.45)

State Appropriations

2,171,255.00

Gifts

Investment Income (endowments, auxiliary and other) Interest Expense (capital assets)

(36,354.09)

Other Nonoperating Revenues

624,692.71

Net Nonoperating Revenues

2,759,593.62

Income before other revenues, expenses, gains, or loss

(2,357.83)

State Capital Appropriations

Capital Grants and Gifts

Federal Grants & Contracts

State Grants & Contracts

Other Grants and Contracts

Total Other Revenues

0.00

Increase in Net Assets NET ASSETS

(2,357.83)

Net Assets-beginning of year, as originally reported

5,438,540.92

Cumulative effect of changes in accounting principle

Prior Year Adjustments

335,506.88

Net Assets-beginning of year, restated

5,774,047.80

Net Assets-End of Year

$5,771,689.97

Annual Financial Report FY 2003 (Version 1.0) 8

Statement of Cash Flows
Skidaway Institute of Oceanography STATEMENT OF CASH FLOWS
For the Year Ended June 30, 2003
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities
CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES C apital Grants and Gifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital Debt and Leases Interest Paid on C apital Debt and Leases Net C ash used by C apital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003 $0.00
3,930,402.53 (3,866,357.19) (3,601,014.21)
40,784.57
6,206.95 1,682,943.80 (1,807,033.55) 2,171,255.00
13,338.13 2,184,593.13
(276,382.34) (75,052.59) (36,354.09)
(387,789.02)
0.00 (10,229.44) 74,531.76 $64,302.32

Annual Financial Report FY 2003 (Version 1.0) 9

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating Activities
Depreciation C hange in Assets and Liabilities:
Receivables, net Inventories Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($2,761,951.45)
608,695.86
36,949.37
(776.34) (46,120.22) 391,735.98 (75,134.65) 39,567.90
($1,807,033.55)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current Assets

$64,302.32 $64,302.32

Skidaway Institute of Oceanography had no transactions to report under Non-Cash Investing, Non-Capital Financing, and Capital and Related-Financing Transactions.

Annual Financial Report FY 2003 (Version 1.0) 10

SKIDAWAY INSTITUTE OF OCEANOGRAPHY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations Skidaway Institute of Oceanography serves the state and national communities by providing oceanographic research that advances fundamental knowledge and, by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity Skidaway Institute of Oceanography is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Skidaway Institute of Oceanography as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Skidaway Institute of Oceanography does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Skidaway Institute of Oceanography is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the Institute is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the Institute's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Annual Financial Report FY 2003 (Version 1.0) 11

Basis of Accounting For financial reporting purposes, the Institute is considered a special-purpose government engaged only in business-type activities. Accordingly, the Institute's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-institute transactions have been eliminated.
The Institute has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The Institute has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash and demand deposits in authorized financial institutions.
Investments The Institute has no investments.
Accounts Receivable Accounts receivable consists of amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the Institute's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories The Institute has no inventories.
Non-current Cash and Investments The Institute does not have cash and investments that are externally restricted to purchase or construct capital or other non-current assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the Institute's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets.
Annual Financial Report FY 2003 (Version 1.0) 12

The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Skidaway Institute of Oceanography when complete. For the year ended June 30, 2003, GSFIC transferred no capital additions to Skidaway Institute of Oceanography.
Deferred Revenues Deferred revenues include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Skidaway Institute of Oceanography had accrued liability for compensated absences in the amount of $356,602.43 as of 7-1-2002. For FY2003, $1,348,882.08 was earned in compensated absences and employees were paid $1,309,314.18, for a net increase of $39,567.90. The ending balance as of 6-30-2003 in accrued liability for compensated absences is $396,170.33.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The Institute's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the Institute's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of
Annual Financial Report FY 2003 (Version 1.0) 13

the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The Institute may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.

Restricted net assets - expendable: Restricted expendable net assets include resources in which the Institute is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.

Restricted net assets expendable Capital Projects: This represents resources for which the Institute is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.

Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the Institute, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted Total Unrestricted Net Assets

June 30, 2003 $0.00
(365,538.03) ($365,538.03)

When an expense is incurred that can be paid using either restricted or unrestricted resources, the Institute's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes Skidaway Institute of Oceanography, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.

Annual Financial Report FY 2003 (Version 1.0) 14

Classification of Revenues The Institute has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, and (2) most Federal, state and local grants and contracts and Federal appropriations. Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships The Institute does not matriculate any students and therefore does not provide any scholarships.
Annual Financial Report FY 2003 (Version 1.0) 15

Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus Skidaway Institute of Oceanography) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus Skidaway Institute of Oceanography), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Annual Financial Report FY 2003 (Version 1.0) 16

Categorization of Deposits
The Institute's cash deposits are categorized by risk as follows:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the Institute or by its agent in the Institute's name.
Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the Institute's name.
Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the Institute's name, and amounts uncollateralized.
Cash Deposits as of June 30, 2003

C ash Deposits Investment Portfolio Accounts
Total C ash Deposits

C arrying Amount
$64,302.32

Bank Balances
$603,704.02

Risk C ategories

1

2

3

$100,000.00

$0.00 $503,704.02

$64,302.32

$603,704.02 $100,000.00

$0.00 $503,704.02

Categorization of Investments The Institute's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the Institute or its agent in the
Institute's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust
department or agent in the Institute's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its
trust department or agent, but not in the Institute's name. Skidaway Institute of Oceanography had no investments as of June 30, 2003.
Annual Financial Report FY 2003 (Version 1.0) 17

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2003.

June 30, 2003

S tudent Tuition and Fees A uxiliary Enterprises and Other Operating A ctivities Fede ral, S tate , and Private Funds O the r
Less A llowance for D oubtful A ccounts

$0.00
1,347,635.66 (41,994.25)
1,305,641.41

Net A ccounts Receivable

$1,305,641.41

Note 4. Inventories The Institute had no inventories as of June 30, 2003.
Note 5. Notes/Loans Receivable The Institute does not matriculate any students and, therefore, does not provide any student loans.

Annual Financial Report FY 2003 (Version 1.0) 18

Note 6. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2003.

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$449,460.00
449,460.00

Additions $0.00 0.00

Reductions $0.00 0.00

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

1,871,603.00 4,743,632.53
500,151.00 3,589,935.53
594,986.38 166,748.16
0.00 11,467,056.60

656,620.70 1,474,122.38
4,000.00 2,134,743.08

1,315.00 328,310.35
998,913.97 206,704.50
1,535,243.82

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

1,375,634.40 1,796,995.39
182,439.04 2,462,523.19
59,498.64 147,927.52
0.00 6,025,018.18

40,021.72 217,505.56
21,008.87 331,505.11
5,240.00
615,281.26

138,878.44 184,232.52
18,520.40 363,751.17
705,382.53

Total Capital Assets, Being Depreciated, Net 5,442,038.42

1,519,461.82

829,861.29

Capital Assets, net

$5,891,498.42

$1,519,461.82

$829,861.29

Ending Balance 6/30/2003
$449,460.00 0.00
449,460.00
1,870,288.00 5,071,942.88
500,151.00 4,065,143.94
388,281.88 170,748.16
0.00 12,066,555.86
1,276,777.68 1,830,268.43
184,927.51 2,430,277.13
59,498.64 153,167.52
0.00 5,934,916.91
6,131,638.95
$6,581,098.95

Annual Financial Report FY 2003 (Version 1.0) 19

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2003.

P re pa id T uitio n a nd Fe e s Research O the r D e fe rre d R e v e nue
To ta ls

June 30, 2003 $0.00
1,364,987.98
$1,364,987.98

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2003 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total
Total Long Term Obligations

Beginning Balance July 1, 2002
$519,005.60

Additions $0.00

Reductions

Ending Balance June 30, 2003

$75,134.65 $443,870.95

356,602.43 0.00
356,602.43

1,348,882.08 1,348,882.08

1,309,314.18 1,309,314.18

396,170.33 0.00
396,170.33

$875,608.03 $1,348,882.08 $1,384,448.83 $840,041.28

Current Portion $80,850.81
195,596.42 195,596.42 $276,447.23

(a) The beginning balance includes the amount shown as current in FY2002 and reclassified as long-term in FY2003.

Annual Financial Report FY 2003 (Version 1.0) 20

Note 9. Lease Obligations
Skidaway Institute of Oceanography is not obligated under any operating leases for the use of real property (land, buildings, and office facilities) and equipment. The Institute is obligated under one an installment purchase agreements for the acquisition of equipment.
Future commitments for installment purchase agreements having remaining terms in excess of one year as of June 30, 2003, were as follows:

Year Ending June 30:

Year

2004

3

2005

4

2006

5

2007 2008 2009 through 2013 2013 through 2017 2018 through 2022

6 7 8-11 11-15 16-20

2023 through 2027

21-25

2028 through 2032

26-30

2033 through 2037

31-35

2038 through 2042

36-40

Total m inim um lease paym ents

Less: Interest Less: Executory costs (if paid) Principal O utstanding

Real Property

C apital Lease s

Operating Leases

$111,406.69 111,406.69 111,406.69 111,406.69 83,555.01

529,182 85,310.82
$443,870.95

$0.00

CAPITAL LEASES
In 2001, Skidaway Institute of Oceanography entered into an installment purchase with Bank of America for shipboard equipment on the R/V Savannah. The Institute's lease agreement has remaining terms of more than one year and will expire in fiscal year 2008. The agreement is cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility.

Annual Financial Report FY 2003 (Version 1.0) 21

Note 10. Retirement Plans

Teachers Retirement System of Georgia

Plan Description Skidaway Institute of Oceanography participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Skidaway Institute of Oceanography who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Skidaway Institute of Oceanography makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$245,897.98 $222,499.29 $269,598.84

Regents Retirement Plan

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.

Funding Policy Skidaway Institute of Oceanography makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statue and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation.

Annual Financial Report FY 2003 (Version 1.0) 22

Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.
Skidaway Institute of Oceanography and the covered employees made the required contributions of $33,196.00 (10.02%) and $29,909.64 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description Skidaway Institute of Oceanography participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $0 which represents 0% of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
Skidaway Institute of Oceanography is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Skidaway Institute of Oceanography and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per
Annual Financial Report FY 2003 (Version 1.0) 23

person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Skidaway Institute of Oceanography, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenses which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Skidaway Institute of Oceanography expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Skidaway Institute of Oceanography (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
Note 13. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the
Annual Financial Report FY 2003 (Version 1.0) 24

group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 21 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, Skidaway Institute of Oceanography recognized as incurred $67,336.65 of expenditures, which was net of $28,743.10 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 25

Note 14. Natural Classifications with Functional Classifications

The Institute's operating expenses by functional classification for FY2003 are shown below: 2002)
Functiona l C la ssification FY2003

Natura l C la ssification

I n s tr u c tio n

Research

P u b lic S e r v ic e

A cadem ic Support

S tude nt S e r v ic e s

Fa c u lty S taff B e ne fits Personal S ervices Travel S cholarships and Fellowships Utilitie s
S upplie s and O the rs S e rv ice s D e pre ciation

$0.00 24,807.20
123.09 (331.37)

$1,047,959.94 1,129,046.35 460,179.54
138,907.12
27,954.60 1,681,259.42
91,094.67

$0.00

$5,974.57 379,482.16
98,189.89
17,228.88
2,543.32 54,638.64 157,926.03

$0.00

Total Ex pe nse s

$24,598.92

$4,576,401.64

$0.00

$715,983.49

$0.00

Natural Classification

Institutional Support

Plant Operations & Maintenance

Functional Classification FY2003
Scholarships Auxiliary & Fellowships Enterprises

Unallocated Expenses

Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities
Supplies and Others Services Depreciation

$148,262.46 402,534.15 245,175.22
16,692.82
855.08 137,993.00
1,602.32

$0.00 487,603.93 135,976.86
200,674.78 245,521.16
971.14

$0.00

$0.00 150.65
37.59

$0.00

11,407.11
15,466.00 13,481.54

1,440.28 343,951.53

Total Expenses

$953,115.05 $1,070,747.87

$0.00 $40,542.89 $345,391.81

Total Expenses
$1,202,196.97 2,398,817.24 964,366.30 0.00 172,828.82 0.00 243,434.89
2,136,441.59 608,695.86
$7,726,781.67

Annual Financial Report FY 2003 (Version 1.0) 26

SOUTH GEORGIA COLLEGE
Financial Report
For the Year Ended June 30, 2003

South Georgia College Douglas, Georgia

Edward D, Jackson, Jr.
President

Wanda E. Lloyd
Vice President for Business Affairs

SOUTH GEORGIA COLLEGE ANNUAL FINANCIAL REPORT
FY 2003
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 7 Statement of Revenues, Expenses and Changes in Net Assets............................................ 8 Statement of Cash Flows ..................................................................................................... 9 Note 1 Summary of Significant Accounting Policies ...................................................... 11 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 16 Note 3 Accounts Receivable............................................................................................. 18 Note 4 Inventories............................................................................................................. 18 Note 5 Notes/Loans Receivable........................................................................................ 18 Note 6 Capital Assets........................................................................................................ 19 Note 7 Deferred Revenue.................................................................................................. 20 Note 8 Long-Term Liabilities ........................................................................................... 20 Note 9 Lease Obligations.................................................................................................. 21 Note 10 Retirement Plans ................................................................................................. 22 Note 11 Risk Management................................................................................................ 23 Note 12 Contingencies...................................................................................................... 24 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 24 Note 14 Natural Classifications With Functional Classifications..................................... 26

SOUTH GEORGIA COLLEGE
Management's Discussion and Analysis

Introduction

South Georgia College is one of the 34 institutions of the University System of Georgia The College, located in Douglas, Georgia, traces its roots to 1906 when the Eleventh District Agricultural and Mechanical School was established by an Act of the Georgia General Assembly. In 1927 the institution became the first state-supported junior college in Georgia and four years later emerged as one of the original units of Georgia's system of public higher education. Today, the College offers Associate of Arts and Associate of Science degree programs that prepare students for transfer in a multitude of baccalaureate program majors. The institution also offers Associate of Applied Science degrees and certificates designed to prepare individuals for careers in several areas of business, human services, and technology. Through its Associate of Science in Nursing degree program the College prepares individuals to become registered nurses and thereby meet regional health care needs. South Georgia College enthusiastically embraces new technology, innovative methods, and collaborative efforts to advance the missions of the University System of Georgia. The institution continues to grow as shown by the comparison numbers that follow.

Faculty

Students

FY2003 FY2002 FY2001

63

1,361

63

1,325

47

1,267

Overview of the Financial Statements and Financial Analysis

South Georgia College is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of South Georgia College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net

Annual Financial Report FY 2003 (Version 1.0) 1

Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant, and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed
Assets: C urrent Assets C apital Assets, net Other Assets Total Assets

June 30, 2003
$615,007.88 7,901,094.44
202,802.53 8,718,904.85

June 30, 2002
$804,747.60 7,375,041.06
56,802.41 8,236,591.07

Liabilities: C urrent Liabilities Noncurrent Liabilities Total Liabilities

319,585.29 185,869.46 505,454.75

444,080.46 444,080.46

Net Assets: Invested in C apital Assets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects Unrestricted Total Net Assets

7,901,094.44 153,798.12 119,824.21
38,733.33 $8,213,450.10

7,375,041.06 153,798.12 119,522.56
144,148.87 $7,792,510.61

The total assets of the institution increased by $482,313.78. This increase is primarily the result of correcting accumulated depreciation on certain capital assets to reflect a 10% residual value. See Note 1 in the notes to the financial statements for additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets. The consumption of assets follows the institutional philosophy to use available resources
Annual Financial Report FY 2003 (Version 1.0) 2

to acquire and improve all areas of the institution to better serve the instruction mission of the institution.

The total liabilities for the year increased by $61,374.29. The primary cause for the increase was an increase in the amount of Deposits Held for Other Organizations. The combination of the increase in total assets of $482,313.78 and the increase in total liabilities of $61,374.29 yielded an increase in total net assets of $420,939.49

Statement of Revenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or incurred by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30, 2003

Operating Revenues Operating Expenses Operating Loss

$5,038,150.50 11,536,352.69 (6,498,202.19)

Nonoperating Revenues and Expenses

5,817,459.59

Income (Loss) Before other revenues, expenses, gains or losses

(680,742.60)

Other revenues, expenses, gains or losses

Increase in Net Assets

(680,742.60)

Net Assets at beginning of year, as originally reported Cumulative effect of changes in accounting principle Prior Year Adjustments Net Assets at beginning of year, restated

7,792,510.61
1,101,682.09 8,894,192.70

Net Assets at End of Year

$8,213,450.10

June 30, 2002 $4,125,608.28 10,871,058.27 (6,745,449.99)
6,670,305.96
(75,144.03)
(75,144.03) 30,019,656.89 22,152,002.25
7,867,654.64 $7,792,510.61

Annual Financial Report FY 2003 (Version 1.0) 3

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:

Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

Operating Revenue Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Auxiliary Other
Total Operating Revenue
Nonoperating Revenue State Appropriations Gifts Investment Income Grants and Contracts Other
Total Nonoperating Revenue
Capital Gifts and Grants State Capital Appropriations Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

June 30, 2003
$937,577.64 2,360,299.48
376,054.20 1,277,777.82
86,441.36
5,038,150.50
5,610,598.53 9,121.18 6,418.88
191,321.00
5,817,459.59

June 30, 2002
$756,265.93 1,692,384.48
447,947.79 1,175,151.04
53,859.04
4,125,608.28
6,543,665.00 6,500.74
20,140.22
100,000.00
6,670,305.96

0.00 $10,855,610.09

0.00 $10,795,914.24

Annual Financial Report FY 2003 (Version 1.0) 4

Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003
$3,654,418.87
625,185.03 929,783.31 1,804,322.64 1,861,457.82 853,064.10 1,205,471.45 602,649.47
11,536,352.69

June 30, 2002
$3,377,522.22
647,959.32 849,968.28 1,749,505.35 2,062,839.17 590,635.05 1,069,937.12 522,691.76
10,871,058.27

$11,536,352.69

$10,871,058.27

Total operating revenue increased by $912,542.22. Revenue from tuition and fees increased by $181,311.71 and revenue from grants and contracts increased by $667,915.00. Operating revenues associated with the auxiliary enterprises also increased by $102,626.78 for the year. The ($71,893.59) reduction in revenues from sales and services of educational departments is primarily the result of a decrease in Continuing Education fees. Much of South Georgia College's continuing education program is Elderhostel, which has been negatively affected by the decrease in retirees' disposable income.

The compensation and employee benefits category increased by approximately $513,992.67. The increase reflects a pay raise for the employees of the institution of approximately three percent with the associated fringe benefits. The increase also reflects an increased cost of health insurance for the employees of the institution.

Utilities decreased by approximately ($14,030.35) during the past year. The decrease was primarily associated with the timing differences in billing periods.

State appropriations revenue was significantly reduced for this fiscal year. The $(933,066.47) decrease in revenue was most notably absorbed by reduced spending for the operation and maintenance of plant. Also, some preventative maintenance was postponed for lack of funding. Approximately $625,000.00 of this decrease resulted from loss of MRR funds. Of this amount, $208,779.00 was merely a reclassification due to the change in funding method for MRR. FY2002 MRR funds were classified as state appropriations whereas FY2003 MRR funding came through the sale of bonds.

Annual Financial Report FY 2003 (Version 1.0) 5

Statement of Cash Flows

The final statement presented by South Georgia College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Year Ended June 30, 2003 Condensed

Cash Provided (used) By: Operating Activities Non-capital Financing Activities Investing Activities Capital and Related Financing Activities
Net Change in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2003
($6,004,399.43) 5,785,928.36 6,418.88 (102,286.58)
(314,338.77) 534,200.86
$219,862.09

Capital Assets

The College had no significant capital asset additions for facilities in fiscal year 2003. The renovation of the Health, Physical Education, and Recreation building and the addition of the Fitness/Wellness Center should be completed and placed into service early in fiscal year 2004. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Economic Outlook

The College's overall financial position is strong. Even with sizable reductions in state appropriations, the College was able to continue operations and provide quality service. The College anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues.

_______________________ Edward D. Jackson, Jr., President South Georgia College
Annual Financial Report FY 2003 (Version 1.0) 6

Statement of Net Assets
S O UTH GE O RGIA C O LLE GE STATEMENT O F NET ASSETS
June 30, 2003
ASSETS Curre nt A sse ts C a sh a nd C a sh Equiv a le nts S ho rt-te rm Inv e stm e nts A cco unts R e ce iv a ble , ne t Inv e nto rie s O the r A sse ts T o ta l C urre nt A sse ts
Noncurre nt A sse ts Noncurrent C ash Inv e stm e nts No te s R e ce iv a ble , ne t C a pita l A sse ts, ne t T o ta l No ncurre nt A sse ts TOTAL ASSETS
LIA BILIT IE S Curre nt Lia bilitie s A cco unts P a y a ble a nd A ccrue d Lia bilitie s D e po sits D eferred Revenue O the r Lia bilitie s D e po sits He ld fo r O the r O rga niza tio ns C o m pe nsa te d A bse nce s (curre nt po rtio n) T o ta l C urre nt Lia bilitie s Noncurre nt Lia bilitie s C o m pe nsa te d A bse nce s Lo ng-te rm Lia bilitie s T o ta l No ncurre nt Lia bilitie s TOTAL LIABILITIES
NET ASSETS Inv e ste d in C a pita l A sse ts, ne t o f re la te d de bt R e stricte d fo r None x pe nda ble Ex pe nda ble C a pita l P ro je cts Unre stricte d TOTAL NET ASSETS

June 30, 2003
$66,063.97
400,405.62 142,767.55
5,770.74 615,007.88
153,798.12
49,004.41 7,901,094.44 8,103,896.97 8,718,904.85
67,207.21
16,661.37 18,964.47 117,082.36 99,669.88 319,585.29
185,869.46
185,869.46 505,454.75
7,901,094.44
153,798.12 119,824.21
38,733.33 $8,213,450.10

Annual Financial Report FY 2003 (Version 1.0) 7

Statement of Revenues, Expenses and Changes in Net Assets

SOUTH GEORGIA COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2003

June 30, 2003

RE VE NUE S

Operating Revenues

Student Tuition and Fees

$2,169,670.46

Less: Sponsored and Unsponsored Scholarships

(1,232,092.82)

Federal Appropriations

Federal Grants and C ontracts

2,326,334.80

State and Local Grants and C ontracts

30,000.00

Nongovernmental Grants and C ontracts

3,964.68

Sales and Services of Educational Departments

376,054.20

Auxiliary Enterprises

1,277,777.82

Other Operating Revenues

86,441.36

Total Operating Revenues

5,038,150.50

EXPENSES

Operating Expenses

Salaries:

Faculty

2,063,460.10

S ta ff

2,883,037.69

Benefits Other Personal Services

1,575,128.53

Travel

68,944.35

Scholarships and Fellowships

867,930.10

Utilities

594,508.29

Supplies and Other Services Depreciation

2,801,939.37 681,404.26

Total Operating Expenses

11,536,352.69

Operating Income (loss) NONOPERATING REVENUES (EXPENSES)

(6,498,202.19)

State Appropriations

5,610,598.53

Gifts

9,121.18

Investment Income (endowments, auxiliary and other) Interest Expense (capital assets)

6,418.88

Other Nonoperating Revenues

191,321.00

Net Nonoperating Revenues

5,817,459.59

Income before other revenues, expenses, gains, or loss

(680,742.60)

State C apital Appropriations

C apital Grants and Gifts

Federal Grants & C ontracts

State Grants & C ontracts

Other Grants and C ontracts

Total Other Revenues

0.00

Increase in Net Assets NET ASSETS

(680,742.60)

Net Assets-beginning of year, as originally reported

7,792,510.61

C umulative effect of changes in accounting principle

Prior Year Adjustments

1,101,682.09

Net Assets-beginning of year, restated

8,894,192.70

Net Assets-End of Year

$8,213,450.10

Annual Financial Report FY 2003 (Version 1.0) 8

Statement of Cash Flows
SOUTH GEORGIA COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2003
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities
CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES C apital Grants and Gifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital Debt and Leases Interest Paid on C apital Debt and Leases Net C ash used by C apital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003
$2,207,476.78
2,199,979.42 386,737.37
(5,112,860.33) (4,951,860.60) (2,100,022.92)
(10,992.00) 19,080.45
389,994.09 516,423.58 153,149.87
4,354.50
203,773.03 7,397.67
82,969.66 (6,004,399.43)
5,610,598.53 (25,112.35) 200,442.18
5,785,928.36
(102,286.58)
(102,286.58)
6,418.88
6,418.88 (314,338.77) 534,200.86 $219,862.09

Annual Financial Report FY 2003 (Version 1.0) 9

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating Activities
Depreciation C hange in Assets and Liabilities:
Receivables, net Inventories Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($6,498,202.19)
526,053.38
(278,794.85) 983.41
7,212.27 79,348.59 14,111.37 125,112.74 19,775.85
($6,004,399.43)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current Assets

$66,063.97 153,798.12 $219,862.09

South Georgia College had no transactions to report under Non-Cash Investing, Non-Capital Financing, and Capital and Related-Financing Transactions.

Annual Financial Report FY 2003 (Version 1.0) 10

SOUTH GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations South Georgia College serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity South Georgia College is one of thirty-four (34) state supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of South Georgia College as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. South Georgia College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, South Georgia College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the College is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of
Annual Financial Report FY 2003 (Version 1.0) 11

materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which predominate activity takes place.
Basis of Accounting For financial reporting purposes, the College is considered a special-purpose government engaged only in business-type activities. Accordingly, the College's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-/college transactions have been eliminated.
The College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The College accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Resale inventories are reported on the consumption method and are valued at cost using the weighted average method.
Annual Financial Report FY 2003 (Version 1.0) 12

Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the College's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia (and thus South Georgia College) recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to South Georgia College when complete.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. South Georgia College had adjusted accrued liability for compensated absences in the amount of $280,530 as of 7-1-2002. For FY2003, $242,035 was earned in compensated absences and $237,026 was used and/or adjusted for salary changes, for a net increase of accrued liability in the amount of $5,009. The ending balance as of 6-30-2003 in accrued liability for compensated absences is $285,539.
Annual Financial Report FY 2003 (Version 1.0) 13

Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The College's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.
Annual Financial Report FY 2003 (Version 1.0) 14

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted Total Unrestricted Net Assets

June 30, 2003
$589,243.34 (276,938.67)
(273,571.34) $38,733.33

When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.

Income Taxes South Georgia College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.

Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:

Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.

Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.

Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the College, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for sponsored and unsponsored scholarships.

Annual Financial Report FY 2003 (Version 1.0) 15

Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus South Georgia College) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus South Georgia College), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Annual Financial Report FY 2003 (Version 1.0) 16

Categorization of Deposits

The College's cash deposits are categorized by risk as follows:

Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the College or by its agent in the College's name.

Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the College's name.

Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the College's name, and amounts uncollateralized.

Cash Deposits as of June 30, 2003

Cash Deposits Investment Portfolio Accounts
Total Cash Deposits

C arrying Amount
$0.00

Bank Balances
$251,499.47

Risk Categories

1

2

$150,000.00 $101,499.47

$0.00

$251,499.47 $150,000.00 $101,499.47

3 $0.00
$0.00

Categorization of Investments
The College's investments are categorized as to credit risk within the three categories described below:
Category 1 - Insured or registered, or securities held by the College or its agent in the College's name
Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the College's name.
Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the College's name.
At June 30, 2003, the College had no investments.

Annual Financial Report FY 2003 (Version 1.0) 17

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2003.

June 30, 2003

S tudent Tuition and Fees A uxiliary Enterprises and Other Operating A ctivities Fede ral, S tate , and Private Funds O the r
Less A llowance for D oubtful A ccounts

($23,230.88) 10,071.55
214,540.98 199,023.97 400,405.62

Net A ccounts Receivable

$400,405.62

Note 4. Inventories

Inventories consisted of the following at June 30, 2003.

B o o k sto re Fo o d S e rv ice s P hy sica l P la nt O the r
T o ta l

June 30, 2003 $ 1 4 2 ,7 6 7 .5 5
$ 1 4 2 ,7 6 7 .5 5

Note 5. Notes/Loans Receivable
Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2003 and 2002. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the College for amounts cancelled under these provisions. As the College determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The College has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2003 the allowance for uncollectible loans was approximately $4,479.00.

Annual Financial Report FY 2003 (Version 1.0) 18

Note 6. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2003.

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$197,146.48
197,146.48

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

1,293,392.00 16,460,328.18
1,239,613.00 1,165,228.33
1,216,653.43
21,375,214.94

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

176,763.57 11,012,367.71
916,298.39 961,637.79
1,130,252.90
14,197,320.36

Total Capital Assets, Being Depreciated, Net 7,177,894.58

Capital Assets, net

$7,375,041.06

Additions $0.00 0.00

Reductions $0.00 0.00

Ending Balance 6/30/2003
$197,146.48 0.00
197,146.48

92,425.55 9,861.03
102,286.58

105,371.91 105,371.91

1,293,392.00 16,460,328.18
1,239,613.00 1,152,281.97
0.00 1,226,514.46
0.00 21,372,129.61

71,132.42 527,180.04
40,969.62 19,848.23

17,676.36 1,101,236.77
91,629.84

22,273.95

681,404.26

1,210,542.97

(579,117.68) (1,105,171.06)

($579,117.68) ($1,105,171.06)

230,219.63 10,438,310.98
865,638.17 981,486.02
0.00 1,152,526.85
0.00 13,668,181.65
7,703,947.96
$7,901,094.44

Annual Financial Report FY 2003 (Version 1.0) 19

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2003.

Pre pa id Tuition a nd Fe e s Research O ther D e fe rre d R e v enue
Tota ls

June 30, 2003 $0.00
16,661.37 $16,661.37

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2003:

Leases Lease Obligations
Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total
Total Long Term Obligations

Beginning Balance July 1, 2002
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2003

$0.00

$0.00

265,763.49

256,802.03

265,763.49

256,802.03

$265,763.49 $256,802.03

237,026.18 237,026.18

285,539.34 0.00
285,539.34

$237,026.18 $285,539.34

Current Portion
$0.00
99,669.88 99,669.88 $99,669.88

(a) The beginning balance includes the amount reported as current in FY2002 and reclassified as long-term in FY2003.

Annual Financial Report FY 2003 (Version 1.0) 20

Note 9. Lease Obligations
South Georgia College is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment.
Future commitments for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2003, were as follows:

Year Ending June 30:

Year

2004

1

2005

2

2006

3

2007

4

2008

5

2009 through 2013

6-10

2014 through 2018

11-15

2019 through 2023

16-20

2024 through 2028

21-25

2029 through 2033

26-30

2034 through 2038

31-35

2039 through 2043

36-40

Total m inim um lease paym ents

Less: Interest

Less: Executory costs (if paid)

Principal O utstanding

Real Property

C apital Lease s

Operating Leases

$81,420.00 78,070.00 39,405.00 13,271.00

$0.00

$212,166.00

CAPITAL LEASES
Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2007 and 2011. South Georgia College had no capital leases for the year which ended on June 30, 2003.
OPERATING LEASES
South Georgia College's non-cancelable operating leases having remaining terms of more than one year expire in various fiscal years from 2004 through 2007. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment.
Non-cancelable operating lease expenditures in 2003 were $79,493.50 for copiers.
Annual Financial Report FY 2003 (Version 1.0) 21

Note 10. Retirement Plans

Teachers Retirement System Of Georgia

Plan Description South Georgia College participates in the Teachers Retirement System of Georgia (TRS), a costsharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of South Georgia College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. South Georgia College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$332,260.92 $306,062.37 $384,501.68

Regents Retirement Plan
Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.
Funding Policy South Georgia College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation. Employees contribute 5% of
Annual Financial Report FY 2003 (Version 1.0) 22

their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.
South Georgia College and the covered employees made the required contributions of $97,341.20 (10.02%) and $48,573.82 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description South Georgia College participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $7,962.89 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
South Georgia College is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. South Georgia College and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue
Annual Financial Report FY 2003 (Version 1.0) 23

Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. South Georgia College, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although South Georgia College expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against South Georgia College (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
Note 13. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University
Annual Financial Report FY 2003 (Version 1.0) 24

System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 75 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, South Georgia College recognized as incurred $214,473.42 of expenditures, which was net of $88,912.20 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 25

Note 14. Natural Classifications With Functional Classifications The College's operating expenses by functional classification for FY2003 are shown below:

Statement of Operating Expenses - Natural vs Func tional Classific ations For the Fisc al Year Ended June 30, 2003
Func tional Classific ation F Y 2003

Natural C lassification

Instruction

Research

Public Service

Academic Support

Faculty Staff B enefits P erso nal Services T rav el Scho larships and Fello wships Utilities Supplies and Others Services Depreciatio n

$ 2,055,973.10 411,153.11
601,479.84
14,698.41 2,613.00 32,698.84 528,377.11 7,425.46

$ 0.00

$ 0.00

$ 0.00 411,603.77
120,211.11
4,184.02
5,208.61 61,703.57 22,273.95

To tal Expenses

$ 3,654,418.87

$ 0.00

$ 0.00

$ 625,185.03

Student Services
$ 87.00 589,250.53 155,686.16
18,934.62 125.00
9,166.86 155,041.35
1,491.79
$ 929,783.31

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003

Natural Classification

Institutional Support

Plant Operations & Maintenance

Functional Classification FY2003

Scholarships & Fellowships

Auxiliary Enterprises

Unallocated Expenses

Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation

$0.00 912,189.13 538,136.26
9,654.49
9,914.22 334,428.54

$0.00 532,679.92 159,050.80 (166,015.33)
3,783.55
530,177.33 796,877.42
4,904.13

$0.00 853,064.10

$7,400.00 26,161.23 564.36
166,015.33 17,689.26 12,128.00 7,342.43 925,511.38 42,659.46

$0.00 602,649.47

Total Expenses

$1,804,322.64

$1,861,457.82

$853,064.10

$1,205,471.45

$602,649.47

Total Expenses
$2,063,460.10 2,883,037.69 1,575,128.53
0.00 68,944.35 867,930.10 594,508.29 2,801,939.37 681,404.26
$11,536,352.69

Annual Financial Report FY 2003 (Version 1.0) 26

SOUTHERN POLYTECHNIC STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2003

Southern Polytechnic State University Atlanta, Georgia

Dr. Lisa A. Rossbacher
President

Mr. Patrick B. McCord
Vice President for Business and Finance

SOUTHERN POLYTECHNIC STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2003
Table of Contents
Management's Discussion and Analysis ..................................................................................... 1 Statement of Net Assets ............................................................................................................... 7 Statement of Revenues, Expenses and Changes in Net Assets.................................................... 8 Statement of Cash Flows ............................................................................................................. 9 Note 1. Summary of Significant Accounting Policies ............................................................. 11 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments.................................... 16 Note 3. Accounts Receivable................................................................................................... 18 Note 4. Inventories................................................................................................................... 19 Note 5. Notes/Loans Receivable.............................................................................................. 19 Note 6. Capital Assets.............................................................................................................. 20 Note 7. Deferred Revenue ............................................................................. 21 Note 8. Long-Term Liabilities ................................................................................................. 21 Note 9. Lease Obligations........................................................................................................ 21 Note 10. Retirement Plans ....................................................................................................... 22 Note 11. Risk Management...................................................................................................... 23 Note 12. Contingencies............................................................................................................. 24 Note 13. Post-Employment Benefits Other Than Pension Benefits ........................................ 24 Note 14. Natural Classifications With Functional Classifications........................................... 26

SOUTHERN POLYTECHNIC STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Southern Polytechnic State University is one of the 34 institutions of the University System of Georgia. Located in Marietta, Georgia, the University was founded in 1948 as a two-year division of Georgia Institute of Technology. The University became accredited as a four-year college in 1970, and was one of the first colleges in the nation to offer the bachelor of Engineering Technology degree. In the summer of 1980, Southern Polytechnic State University officially became the 14th senior college and the 33rd independent unit of the University System. The campus currently encompasses more than 230 acres and contains 34 buildings.

Southern Polytechnic State University offers baccalaureate and masters degrees that contain a balance of technical, professional, and liberal arts courses with an emphasis on relevant, application-oriented teaching. The University's unique mission attracts a highly qualified faculty and a student body that has had the third highest SAT average amongst System institutions for the last four years. The University's growth over the last three years has been relatively stable with a slight upward trend as shown by the comparison numbers that follow:

Faculty

Students

FY2003 FY2002 FY2001

137

3065

136

3685

137

3546

Overview of the Financial Statements and Financial Analysis

Southern Polytechnic State University is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2002 and FY 2003.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Southern Polytechnic State University. The Statement of Net Assets presents
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end-of-year data concerning Assets (current and non-current), Liabilities (current and noncurrent), and Net Assets (Assets minus Liabilities). The difference between current and noncurrent assets will be discussed in the footnotes to the financial statements.

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

Assets: C urrent Assets C apital Assets, net Other Assets Total Assets

June 30, 2003
$7,015,878.94 45,319,037.57
3,560,464.62 55,895,381.13

June 30, 2002
$7,422,366.60 46,768,662.33
685,449.23 54,876,478.16

Liabilities: C urrent Liabilities Noncurrent Liabilities Total Liabilities

5,982,972.32 803,313.26
6,786,285.58

2,505,474.55 2,505,474.55

Net Assets: Invested in C apital Assets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects Unrestricted Total Net Assets

45,319,037.57 1,454,709.20 764,868.67
1,570,480.11 $49,109,095.55

46,768,662.33 2,691,682.23 1,149,289.39
1,761,369.66 $52,371,003.61

The total assets of the institution increased by $1,018,902.97. See Note 1 in the notes to the financial statements for additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution.
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The total liabilities for the year increased by $4,280,811.03. The combination of the increase in total assets of $1,018,902.97 and the increase in total liabilities of $4,280,811.03 yields a net decrease in total net assets of ($3,261,908.06). The decrease in total net assets is primarily in the categories of increased deferred revenue and net accounts receivables, which represents summer revenue that will be recognized in the subsequent fiscal year.

Statement of Revenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30, 2003

Operating Revenues Operating Expenses Operating Loss

$14,611,749.33 37,817,801.15 (23,206,051.82)

Nonoperating Revenues and Expenses

20,100,987.53

Income (Loss) Before other revenues, expenses, gains or losses

(3,105,064.29)

Other revenues, expenses, gains or losses

Increase in Net Assets

(3,105,064.29)

Net Assets at beginning of year, as originally reported Cumulative effect of changes in accounting principle Prior Year Adjustments Net Assets at beginning of year, restated

52,371,003.61
(156,843.77) 52,214,159.84

Net Assets at End of Year

$49,109,095.55

June 30, 2002 $20,097,861.64
41,728,358.38 (21,630,496.74) 24,176,135.62
2,545,638.88 12,312,645.53 14,858,284.41 89,125,714.45 51,612,995.25 37,512,719.20 $52,371,003.61

The Statement of Revenues, Expenses, and Changes in Net Assets reflect a decrease in the net assets at the end of the year in the amount of (3,261,908.06).
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Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

Operating Revenue Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Auxiliary Other
Total Operating Revenue
Nonoperating Revenue State Appropriations Gifts Investment Income Grants and Contracts Other
Total Nonoperating Revenue
Capital Gifts and Grants State Capital Appropriations Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

June 30, 2003

June 30, 2002

$7,666,514.75 2,767,474.03 1,190,558.69 2,935,362.92 51,838.94
14,611,749.33

$9,005,063.07 6,849,638.41 938,377.76 2,785,163.79 519,618.61
20,097,861.64

19,735,153.00 96,714.53
269,120.00 20,100,987.53

22,074,754.00 1,893,569.08 1,382.28
206,430.26
24,176,135.62

12,312,645.53

0.00 $34,712,736.86

12,312,645.53 $56,586,642.79

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Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003
$16,319,287.16 328,430.90 492,448.22
3,274,902.20 3,079,751.52 3,527,257.39 4,788,879.64 2,889,516.73 3,117,327.39
37,817,801.15
$37,817,801.15

June 30, 2002
$17,831,148.15 457,254.04 453,955.98
3,089,314.44 3,263,162.60 3,134,040.09 5,968,905.71 4,946,692.60 2,583,884.77
41,728,358.38
$41,728,358.38

The compensation and employee benefits category increased by approximately $582,840.52. The increase reflects a pay raise for the employees of the institution of approximately three percent with the associated fringe benefits. The increase also includes an increased cost of health insurance for the employees of the institution.
Utilities cost remained constant by only decreasing by ($76.53) during the past year. The University was able to control utility cost by negotiating a fixed price while natural gas costs increased during the winter of fiscal year 2003.
Under non-operating revenues (expenses) state appropriations decreased by approximately ($2,339,601.00). The entire University System of Georgia experienced a downturn of the economy in Georgia after September 11, 2002. This dramatic event continues to negatively impact the state revenue's, which in turn required a dramatic decrease in state appropriations during fiscal year 2003.
Statement of Cash Flows
The final statement presented by the Southern Polytechnic State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital
Annual Financial Report FY 2003 (Version 1.0) 5

financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Year Ended June 30, 2003, Condensed

Cash Provided (used) By: Operating Activities Non-capital Financing Activities Investing Activities Capital and Related Financing Activities
Net Change in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2003
($21,441,146.95) 20,957,353.35 103,956.37 659,459.24
279,622.01 918,372.20
$1,197,994.21

Capital Assets
Southern Polytechnic State University did not have any major capital projects during the fiscal year 2002-2003.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Economic Outlook
The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong. The University anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues.

_______________________ Dr. Lisa A. Rossbacher, President Southern Polytechnic State University
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Statement of Net Assets

S O U TH E RN P O L Y TE C H NIC S TA TE U NIV E RS ITY

STATE M ENT O F NET ASSE TS

June 30, 2003

June 30, 2003

ASSETS

Curre nt A sse ts

C a s h a n d C a s h E q u iv a le n ts

$ 1 ,1 9 7 ,9 9 4 .2 1

S h o rt-te rm In v e s tm e n ts

A cco u nts R e ce iv a b le , ne t

5 ,1 0 9 ,8 6 3 .1 7

Inv e nto rie s

O th e r A s s e ts

7 0 8 ,0 2 1 .5 6

T o ta l C urre n t A sse ts

7 ,0 1 5 ,8 7 8 .9 4

No ncurre nt A sse ts Noncurrent C ash Inv e stm e n ts N o te s R e c e iv a b le , n e t C a p ita l A s s e ts , n e t T o ta l N o n cu rre n t A ss e ts TOTAL ASSETS

2 ,8 5 6 ,0 5 4 .2 1 7 0 4 ,4 1 0 .4 1
4 5 ,3 1 9 ,0 3 7 .5 7 4 8 ,8 7 9 ,5 0 2 .1 9 5 5 ,8 9 5 ,3 8 1 .1 3

LIA BILITIES Cu rre nt Lia b ilitie s
A c c o u n ts P a y a b le a n d A c c ru e d Lia b ilitie s D e p o s its D e fe rre d R e v e nue O th e r Lia b ilitie s D e p o s its H e ld fo r O th e r O rg a n iz a tio n s C o m p e n sa te d A b s e n ce s (cu rre n t p o rtio n )
T o ta l C u rre n t Lia b ilitie s No nc urre n t Lia b ilitie s
C o m p e n sa te d A b s e n ce s Lo ng -te rm Lia b ilitie s
T o ta l N o n cu rre n t Lia b ilitie s TOTA L LIA BILITIES

7 5 0 ,3 6 7 .8 6 4 4 ,8 1 2 .4 6
3 ,9 8 8 ,7 1 0 .6 6 (1 3 0 ,4 0 1 .6 0 )
1 ,3 0 7 ,6 4 1 .0 0 2 1 ,8 4 1 .9 4
5 ,9 8 2 ,9 7 2 .3 2
8 0 3 ,3 1 3 .2 6
8 0 3 ,3 1 3 .2 6 6 ,7 8 6 ,2 8 5 .5 8

NET ASSETS In v e s te d in C a p ita l A s s e ts , n e t o f re la te d d R e s tric te d fo r N o n e x p e n d a b le Ex p e nd a b le C a p ita l P ro je c ts U nre stricte d TOTAL NET ASSETS

4 5 ,3 1 9 ,0 3 7 .5 7
1 ,4 5 4 ,7 0 9 .2 0 7 6 4 ,8 6 8 .6 7
1 ,5 7 0 ,4 8 0 .1 1 $ 4 9 ,1 0 9 ,0 9 5 .5 5

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Statement of Revenues, Expenses and Changes in Net Assets

SOUTHERN POLYTECHNIC STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2003
June 30, 2003

REVENUES

Operating Revenues

Student Tuition and Fees

$8,863,701.20

Less: Sponsored and Unsponsored Scholarships

(1,197,186.45)

Federal Appropriations

Federal Grants and C ontracts

1,794,496.30

State and Local Grants and C ontracts

282,955.27

Nongovernmental Grants and C ontracts Sales and Services of Educational Departments

690,022.46 1,190,558.69

Auxiliary Enterprises

2,935,362.92

Other Operating Revenues

51,838.94

Total Operating Revenues

14,611,749.33

EXPENSES

Operating Expenses

Salaries:

Faculty Staff

10,155,498.87 10,976,637.90

Benefits Other Personal Services

5,360,337.32 2,418.00

Travel

294,860.14

Scholarships and Fellowships

1,784,155.83

Utilities

1,346,953.11

Supplies and Other Services Depreciation

5,790,854.65 2,106,085.33

Total Operating Expenses

37,817,801.15

Operating Income (loss) NONOPERATING REVENUES (EXPENSES)

(23,206,051.82)

State Appropriations

19,735,153.00

Gifts

Investment Income (endowments, auxiliary and other) Interest Expense (capital assets)

96,714.53

Other Nonoperating Revenues

269,120.00

Net Nonoperating Revenues

20,100,987.53

Income before other revenues, expenses, gains, or loss

(3,105,064.29)

State C apital Appropriations C apital Grants and Gifts Federal Grants & C ontracts

State Grants & C ontracts

Other Grants and C ontracts

Total Other Revenues

0.00

Increase in Net Assets NET ASSETS

(3,105,064.29)

Net Assets-beginning of year, as originally reported

52,371,003.61

C umulative effect of changes in accounting principle

Prior Year Adjustments

(156,843.77)

Net Assets-beginning of year, restated

52,214,159.84

Net Assets-End of Year

$49,109,095.55

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Statement of Cash Flows
SOUTHERN POLYTECHNIC STATE UNIVERSITY STATEMENT OF CASH FLOWS
For the Year Ended June 30, 2003

June 30, 2003

CASH F LOWS F ROM OPERATING ACTIVITIES

Tuition and Fees

$7,658,373.14

Federal Appropriations

Grants and C ontracts (Exchange)

3,419,996.68

Sales and Services of Educational Departments

1,190,558.69

Payments to Suppliers

(14,129,975.62)

Payments to Employees

(21,157,957.93)

Payments for Scholarships and Fellowships

(1,783,155.83)

Loans Issued to Students and Employees

103,163.00

C ollection of Loans to Students and Employees

(105,608.96)

Auxiliary Enterprise C harges:

Residence Halls

1,121,980.79

B o o k s to r e

101,591.46

Food Services

585,918.69

Parking/Transportation

203,067.00

Health Services

201,479.26

Intercollegiate Athletics

603,125.68

Other Organizations

118,200.04

Other Receipts (payments)

428,096.96

Net C ash Provided (used) by Operating Activities

(21,441,146.95)

CASH F LOWS F ROM NON-CAPITAL F INANCING ACTIVITIES

State Appropriations

19,735,153.00

Agency Funds Transactions

1,222,200.35

Gifts and Grants Received for Other Than C apital Purposes

Net C ash Flows Provided by Non-capital Financing Activitie

20,957,353.35

CASH F LOWS F ROM CAPITAL AND RELATED F INANCING ACTIVITIES

C apital Grants and Gifts Received

Proceeds from sale of C apital Assets

2,998.74

Purchases of C apital Assets

656,460.50

Principal Paid on C apital Debt and Leases

Interest Paid on C apital Debt and Leases

Net C ash used by C apital and Related Financing Activities

659,459.24

CASH F LOWS F ROM INVESTING ACTIVITIES

Proceeds from Sales and Maturities of Investments

Interest on Investments

103,956.37

Purchase of Investments

Net C ash Provided (used) by Investing Activities

103,956.37

Net Increase/Decrease in C ash

279,622.01

C ash and C ash Equivalents - Beginning of year

918,372.20

C ash and C ash Equivalents - End of Year

$1,197,994.21

Annual Financial Report FY 2003 (Version 1.0) 9

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating Activities
D e p r e c ia tio n C hange in Assets and Liabilities:
Receivables, net I nv e nto r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($23,206,051.82)
2,106,085.26
(3,369,963.41)
144,258.37 235,813.96 2,541,578.84
28,203.55 78,928.30
($21,441,146.95)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current Assets

$1,197,994.21 $1,197,994.21

____________________________________________________________________________________________________________________
Southern Polytechnic State University had no transactions to report as "Non-Cash Investing, Non-Capital Financing, and Capital and Related Financing Transactions".

Annual Financial Report FY 2003 (Version 1.0) 10

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations Southern Polytechnic State University serves the state, and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity Southern Polytechnic State University is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Southern Polytechnic State University as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Southern Polytechnic State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Southern Polytechnic State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of
Annual Financial Report FY 2003 (Version 1.0) 11

materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
Basis of Accounting For financial reporting purposes, the University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-university transactions have been eliminated.
The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Consumable supplies are carried at the lower of cost or market on either the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis.
Annual Financial Report FY 2003 (Version 1.0) 12

Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Southern Polytechnic State University when complete.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues,
Annual Financial Report FY 2003 (Version 1.0) 13

Expenses, and Changes in Net Assets. Southern Polytechnic State University had accrued liability for compensated absences in the amount of $803,313.26 as of 7-1-2002. For FY2003, $715,653.31 was earned in compensated absences and employees were paid $693,811.37, for a net increase of $21,841.94. The ending balance as of 6-30-2003 in accrued liability for compensated absences is $825,155.20.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The University's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.
Annual Financial Report FY 2003 (Version 1.0) 14

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted Total Unrestricted Net Assets

June 30, 2003
$232,377.07 897,194.29
440,908.75 $1,570,480.11

When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.

Income Taxes Southern Polytechnic State University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.

Classification of Revenues The University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:

Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.

Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.

Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships.

Annual Financial Report FY 2003 (Version 1.0) 15

Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus Southern Polytechnic State University) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus Southern Polytechnic State University), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Annual Financial Report FY 2003 (Version 1.0) 16

Categorization of Deposits
The University's cash deposits are categorized by risk as follows:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the University or by its agent in the University's name.
Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University's name.
Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the University's name, and amounts uncollateralized.
Cash Deposits as of June 30, 2003

Cash Deposits Investment Portfolio Accounts
Total Cash Deposits

Carrying Amount
$1,197,994.81

Bank Balances
$2,190,746.57

Risk Categories

1

2

3

$100,000.00

$0.00 $2,090,746.57

$1,197,994.81 $2,190,746.57 $100,000.00

$0.00 $2,090,746.57

Categorization of Investments
The University's investments are categorized as to credit risk within the three categories described below:
Category 1 - Insured or registered, or securities held by the University or its agent in the University's name
Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name.
Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University's name.

Annual Financial Report FY 2003 (Version 1.0) 17

At June 30, 2003, the University's investments consisted of the following:

Type of Investments
C ommon Stock C orporate Bonds Securities and C orporate Obligations

Risk C ategories

1

2

$3,945.00

$0.00

Totals

$3,945.00

$0.00

3 $0.00
$0.00

C arrying Amount
$3,945.00 0.00 0.00
$3,945.00

Investments Not Subject to C ategorizations: Board of Regents
Short-Term Fund Balanced Income Fund Total Return Fund Investment Portfolio Accounts Mutual Funds Real Estate State Investment Pool Short-Term Investments
Total Investments

472,164.65 2,379,944.56
$2,856,054.21

Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool.
Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2003.

Student Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal, State, and Private Funds Other
Less Allowance for Doubtful Accounts
Net Accounts Receivable

June 30, 2003
$1,764,266.89 1,389,450.98 703,837.06 1,448,479.57 5,306,034.50 196,171.33
$5,109,863.17

Annual Financial Report FY 2003 (Version 1.0) 18

Note 4. Inventories Southern Polytechnic State University does not maintain any Inventories. Note 5. Notes/Loans Receivable Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2003 and 2002. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The University has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2003 Southern Polytechnic State University had no allowance for uncollectible loans.
Annual Financial Report FY 2003 (Version 1.0) 19

Note 6. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2003:

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$753,396.56
753,396.56

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

1,623,504.00 60,290,444.47
567,531.00 7,081,318.96
5,034,933.50 30,500.00
74,628,231.93

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

611,519.84 18,137,141.97
500,658.53 5,679,034.86
3,673,762.00 10,848.96
28,612,966.16

Total Capital Assets, Being Depreciated, Net 46,015,265.77

Capital Assets, net

$46,768,662.33

Additions $0.00 0.00
764,636.35 76,558.00
841,194.35
64,940.16 1,449,559.45
17,210.22 531,771.52 275,240.00
762.50 2,339,483.85 (1,498,289.50) ($1,498,289.50)

Reductions $0.00 0.00

Ending Balance 6/30/2003
$753,396.56
753,396.56

184,733.85 184,733.85

1,623,504.00 60,290,444.47
567,531.00 7,661,221.46
0.00 5,111,491.50
30,500.00 75,284,692.43

144,955.85 8,215.04
54,580.25
25,571.20 76.25
233,398.59

676,460.00 19,441,745.57
509,653.71 6,156,226.13
0.00 3,923,430.80
11,535.21 30,719,051.42

(48,664.74) 44,565,641.01

($48,664.74) $45,319,037.57

Annual Financial Report FY 2003 (Version 1.0) 20

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2003.

Prepa id Tuition and Fees Research O ther D eferred R ev enue
T o ta ls

June 30, 2003 $2,622,782.18
1,365,928.48 $3,988,710.66

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2003 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2002
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2003

$0.00

$0.00

Current Portion
$0.00

Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total

803,313.26 803,313.26

715,653.31 715,653.31

693,811.37 693,811.37

825,155.20 0.00
825,155.20

21,841.94 21,841.94

Total Long Term Obligations

$803,313.26 $715,653.31

$693,811.37 $825,155.20

$21,841.94

(a) The beginning balance includes the amount shown as current in FY2002 and reclassified as long-term in FY2003.

Note 9. Lease Obligations
CAPITAL LEASES
Southern Polytechnic State University currently did not have Capital Leases during fiscal year 2003.

OPERATING LEASES
Southern Polytechnic State University currently did not have operating leases during fiscal year 2003.

Annual Financial Report FY 2003 (Version 1.0) 21

Note 10. Retirement Plans

Teachers Retirement System Of Georgia

Plan Description Southern Polytechnic State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Southern Polytechnic State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Southern Polytechnic State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$1,223,412.48 $1,734,039.25 $1,684,254.59

Regents Retirement Plan
Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.
Funding Policy Southern Polytechnic State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statue and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation.
Annual Financial Report FY 2003 (Version 1.0) 22

Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.
Southern Polytechnic State University and the covered employees made the required contributions of $ 600,652.80 (10.02%) and $ 299,728.78 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description Southern Polytechnic State University participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $ 63,144.14 which represents 7.5 % of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
Southern Polytechnic State University is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Southern Polytechnic State University and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per
Annual Financial Report FY 2003 (Version 1.0) 23

person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Southern Polytechnic State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Southern Polytechnic State University expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Southern Polytechnic State University (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
Note 13. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the
Annual Financial Report FY 2003 (Version 1.0) 24

group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 152 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, Southern Polytechnic State University recognized as incurred $576,096.79 of expenditures, which was net of $224,087.24 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 25

Note 14. Natural Classifications With Functional Classifications

The University's operating expenses by functional classification for FY2003 are shown below:
Functional Classification FY2003

Natural C lassification

Instruction

Research

Public Service

Academic Support

Student Services

Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities
Supplies and Others Services Depreciation

$ 9,950,746.71 1,912,318.11
2,525,828.68
23,000.47 7,836.00 114,388.61
1,589,845.25 195,323.33

$ 171,400.30 85,624.00 24,135.04
15,232.32
30,122.57 1,916.67

$ 0.00 383,289.12 83,396.43
15,375.42
4,903.78 5,483.47

$ 20,433.86 1,804,704.89
388,407.07
101,972.26
65,345.36 615,023.45 279,015.31

$ 12,918.00 1,736,255.45
383,872.63
73,662.42 7,848.95 38,031.43
821,451.85 5,710.79

Total Expenses

$ 16,319,287.16

$ 328,430.90

$ 492,448.22

$ 3,274,902.20

$ 3,079,751.52

Natural Classification

Institutional Support

Plant Operations & Maintenance

Functional Classification FY2003

Scholarships & Fellowships

Auxiliary Enterprises

Unallocated

Total

Expenses Expenses

Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities
Supplies and Others Services Depreciation

$0.00 2,731,195.44 1,372,204.52
2,418.00 16,753.62 (1,197,186.45) 34,365.39 431,757.08 135,749.79

$0.00 1,623,688.58
418,073.72 (387,934.82)
2,254.49
995,511.90 684,214.19 1,453,071.58

$0.00
2,782,775.33 106,741.40

$0.00 699,562.31 164,419.23 387,934.82 46,609.14 182,882.00 94,406.64 1,506,215.39 35,297.86

$0.00

$10,155,498.87 10,976,637.90 5,360,337.32
2,418.00 294,860.14 1,784,155.83 1,346,953.11 5,790,854.65 2,106,085.33

Total Expenses

$3,527,257.39

$4,788,879.64

$2,889,516.73

$3,117,327.39

$0.00

$37,817,801.15

Annual Financial Report FY 2003 (Version 1.0) 26

GEORGIA INSTITUTE OF TECHNOLOGY
Financial Report
For the Year Ended June 30, 2003

Georgia Institute of Technology Atlanta, Georgia

G. Wayne Clough
President

Robert K. Thompson
Senior Vice President Administration and Finance
Joel E. Hercik Associate Vice President Financial Services

GEORGIA INSTITUTE OF TECHNOLOGY ANNUAL FINANCIAL REPORT FY 2003
Table of Contents
Management's Discussion and Analysis ...............................................................................1 Statement of Net Assets .........................................................................................................9 Statement of Revenues, Expenses and Changes in Net Assets..............................................10 Statement of Cash Flows .......................................................................................................11 Note 1 Summary of Significant Accounting Policies ............................................................13 Note 2 Cash and Cash Equivalents, Other Deposit, and Investments ...................................18 Note 3 Accounts Receivable..................................................................................................20 Note 4 Inventories..................................................................................................................21 Note 5 Notes/Loans Receivable.............................................................................................21 Note 6 Capital Assets.............................................................................................................22 Note 7 Deferred Revenue.......................................................................................................22 Note 8 Long Term Liabilities ................................................................................................23 Note 9 Lease Obligations.......................................................................................................23 Note 10 Retirement Plans ......................................................................................................26 Note 11 Risk Management.....................................................................................................27 Note 12 Contingencies...........................................................................................................28 Note 13 Post Employment Benefits Other Than Pension Benefits........................................28 Note 14 Natural Classifications with Functional Classifications ..........................................30

GEORGIA INSTITUTE OF TECHNOLOGY
Management's Discussion and Analysis
Introduction
The Georgia Institute of Technology, also known as Georgia Tech, is one of the nation's leading research universities, providing a focused, technologically based education to nearly 17,000 undergraduate and graduate students. Georgia Tech has many nationally recognized programs and is ranked ninth in the nation by U.S. News and World Report. It offers degrees through the Colleges of Architecture, Engineering, Sciences, Computing, Management, and the Ivan Allen College of Liberal Arts. As a leading technological Institute, Georgia Tech has more than 50 interdisciplinary research centers that consistently contribute vital research and innovation to America's government, industry, and business.
Founded in 1885 to help move Georgia's economy into the industrial age, Georgia Tech exceeded the expectations of its founders by becoming a multi-faceted research Institute that serves as a source of new technologies and a driver of economic development. With a clear vision of technology and leadership, the Institute provides a cutting edge education for the 21st century.
Overview of the Financial Statements and Financial Analysis
Georgia Institute of Technology is pleased to present its financial statements for fiscal year 2003 beginning July 1, 2002 and ending June 30, 2003. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the Institute's financial statements provides an overview of financial activities for the year. This is the second set of financial statements issued under new reporting guidelines established by Governmental Accounting Standards Board (GASB) Statements 34 and 35. The statements focus on the financial condition, results of operations and cash flows of the Institute as a whole, with resources classified for accounting and reporting purposes into four net asset categories: invested in capital assets, net of related debt; restricted-nonexpendable; restricted-expendable; and unrestricted. The basis of accounting is full accrual, including capitalization and depreciation of equipment and fixed assets. Because this is the second year under the new standards, comparative data with the prior fiscal year's results are presented in this year's Management's Discussion and Analysis.
Statement of Net Assets
Using the accrual basis of accounting, the Statement of Net Assets presents the assets, liabilities, and resulting net assets of the Institute as of the end of the fiscal year. Assets, by definition, represent measured economic value obtained and controlled by an entity as a result of past
Annual Financial Report FY 2003 (Version 1.0) 1

transactions and events. This statement identifies the assets available for current operations, debts owed, and net assets available to continue operations in the future.
Net assets are divided into three major categories. The first category, Invested in Capital Assets Net of Related Debt, identifies the institution's equity in property, plant and equipment. The next asset category is Restricted Net Assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is Unrestricted Net Assets, which are available for any lawful purpose of the institution.
The Statement of Net Assets for the year ended June 30, 2003 indicates that over $43 million in unrestricted net assets and $16 million in restricted net assets are available for future operations. Unrestricted net assets decreased by $57.9 million during the year, primarily as a result of the transfer of the State Data Research Center to the Georgia Department of Education ($38.5 million), and significant outlays for capital construction activities ($32.9 million).
Following is a comparative, condensed version of the Institute's Statement of Net Assets as of June 30, 2002 and June 30, 2003:

Statement of Net Assets, Condensed (dollars in thousands)

Assets Current Assets Non-Current Assets

FY 2003

Increase/ FY 2002 (Decrease)

$ 126,809 $ 183,756 $ (56,947)

784,216

753,781

30,435

Total Assets

911,025

937,537

(26,512)

Liabilities Current Liabilities Non-Current Liabilities

77,103 11,424

70,890 10,750

6,213 674

Total Liabilities

88,527

81,640

6,887

Net Assets Invested in Capital Assets, Net of Related Debt Restricted - Nonexpendable Restricted - Expendable Unrestricted

718,943 43,608 16,299 43,648

693,827 43,973 16,530 101,567

25,116 (365) (231)
(57,919)

Total Net Assets

$ 822,498 $ 855,897 $ (33,399)

Annual Financial Report FY 2003 (Version 1.0) 2

Statement of Revenues, Expenses and Changes in Net Assets
Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking, operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided, at least directly. For example, state appropriations are non-operating revenues because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues, even though customers paying for those goods and services are receiving the benefits.
Following is a comparative, condensed version of the Institute's Statement of Revenues, Expenses and Changes in Net Assets as of June 30, 2002 and June 30, 2003:

Statement of Revenues, Expenses and Changes in Net Assets, Condensed (dollars in thousands)

Increase/ FY 2003 FY 2002 Decrease

Operating Revenues

$ 500,161 $ 451,617 $ 48,544

Operating Expenses

747,784 663,780

84,004

Operating Loss

(247,623) (212,163) (35,460)

Nonoperating Revenues and Expenses

177,492 232,730 (55,238)

Income (Loss) Before other revenues, expenses, gains or losses

(70,131) 20,567 (90,698)

Other revenues, expenses, gains or losses
Increase in Net Assets
Net Assets at beginning of year, as originally reported Cumulative effect of changes in accounting principle Prior Year Adjustments Net Assets at beginning of year, restated
Net Assets at End of Year

19,579 (50,552)

29,772 (10,193) 50,338 (100,890)

855,897
17,153 873,050

1,244,023 (438,465)
805,558

67,492

$ 822,498 $ 855,897 $ (33,399)

Annual Financial Report FY 2003 (Version 1.0) 3

Total revenues (operating, nonoperating, and other) for the year ended June 30, 2003 were $697.2 million, down $17 million from the prior year total of $714.2 million. State funding was reduced by $48.2 million due to budget cuts from the economic downturn, and the transfer of the State Data Research Center to the Georgia Department of Education. The reduction in the nonoperating revenue/(expense) category results primarily from the loss on disposal of buildings (razed for new construction) and equipment. The reduction in state capital appropriations reflects a smaller expenditure of capital funds from the Georgia State Financing and Investment Commission. Strong growth in research revenue can be attributed to the Institute's past strategic investments in facilities and programs, and the excellence of the Institute's faculty. The tuition revenue increase resulted from 6% in-state and 14% out-of-state average increases in tuition and fees charged, coupled with an increase in student enrollment. Taken together, these changes show that the Institute is becoming more reliant on its ability to generate revenue from and for its programs. The graph below reflects the essence of these significant shifts in revenue and funding support, and the "Economic Outlook" section at the end of this Management Discussion and Analysis provides further analysis of this trend.

Georgia Institute of Technology Revenue
(dollars in millions)
$500

FY 2002 $714.2

FY 2003 $697.2

$400 $300 $200

$326.5

$355.8

$229.0

$180.7

$100

$75.2

$82.3

$83.6

$78.4

$0 Tuition and Fees

Gifts, Grants and Contracts

Sales, Services and Other

State Appropriations

Annual Financial Report FY 2003 (Version 1.0) 4

Total expenses for the year were $747.8 million, exceeding revenue by $50.6 million. By object of expenditure classification, there was a shift in expenses to salaries/benefits and travel/supplies compared to the prior year (see graph below).
Georgia Institute of Technology Expenses by Object of Expenditure Classification
(dollars in millions)

$500 $400

$469.5 $423.0

FY 2002 $663.8

FY 2003 $747.8

$300 $200

$172.4 $207.8

$100 $0

$42.3 $41.4

Salaries and Benefits

Travel, Supplies, and Other

Depreciation

$19.3 $19.8

$6.8 $9.3

Utilities

Scholarships and Fellowships

The functional classification graph shows a greater emphasis on Instruction, Research, and Public Service (a growth rate of 19%), compared to flat or minimal growth in support functions. This chart shows that cost cutting during the economic downturn did protect the Institute's core mission as intended.

Annual Financial Report FY 2003 (Version 1.0) 5

Georgia Institute of Technology Expenses by Functional Classification
(dollars in m illions)

$600 $500

$543.8 $472.8

FY 2002 $663.8

FY 2003 $747.8

$400

$300

$200
$100
$0 Ins tr uction,
Research, and Public Service

$98.2 $94.7

$47.4 $52.1

Student and Ins titutional
Support

Operations and Maintenance of
Plant

$38.6 $47.9

$6.8 $9.3

Auxiliary

Scholar s hips

Enterprises and Fellow ships

Statement of Cash Flows
The last statement in the report is the Statement of Cash Flows. The statement is divided into five sections. The first section deals with operating cash flows and reflects the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, noninvesting, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related assets. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Due primarily to significant capital construction activities, the transfer of the State Data Research Center from the Institute to the Georgia Department of Education, and the decision to invest in slightly longer term, higher yielding investments, the Institute's cash balance decreased by $62.7 million during the year. The Institute's overall cash position remained strong, with over $52 million available at June 30, 2003.
Cash Flows for the Year Ended June 30, 2003, are reflected in a condensed table below. The cash balance for the beginning of the year has been adjusted upwards to reflect a reporting change for highly liquid short-term investments held with the State of Georgia's Local Government Investment Pool and the Board of Regents Short Term Investment Pool. With approval of the State Audit Department and the Board of Regents, these assets will now be presented as cash and cash equivalents. This reporting change resulted in a change in the

Annual Financial Report FY 2003 (Version 1.0) 6

beginning cash balance from a cash overdraft of $4 million to a positive balance of $114.9 million. The condensed statement follows:

Statement of Cash Flows, Condensed (dollars in thousands)

Cash Provided (Used) By:

Operating Activities

$

Non-capital Financing Activities

Capital and Related Financial Activities

Investing Activity

Cash Flow for the Year

Beginning Cash Balance

Ending Cash Balance

$

(206,962) 187,411 (44,777) 1,628 (62,700) 114,888 52,188

Capital Assets
The Institute officially added one major structure in this fiscal year, the new Student Health Center at a cost of $6.3 million. However, the Ford Environmental Science and Technology Building was occupied but not officially transferred to the Institute. It should officially be transferred and recorded on the Institute's books early in the next fiscal year.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Economic Outlook
While the Institute's long-term local revenue outlook is positive, the national and local economic decline continues to negatively impact state funding. Additional reductions in state funding are expected in fiscal years 2004 and 2005. The Institute continues to look for ways to reduce costs and capitalize on its strengths and its ability to generate local revenue to maintain positive momentum and leadership.
These strengths include:
A rapidly growing and well-diversified but strategically focused research program that increased revenue by $30 million in the current year with new awards in FY03 at a record high of $292 million, thus well positioning the Institute for the upcoming year.
Nationally recognized programs that enable the Institute to grow by attracting quality students from all over the world as well as Georgia.
Significant new investments in research and instructional facilities, including global life long learning facilities and technology.
An increasing emphasis on technology transfer, economic development, and business/industry partnerships.
Continuing high levels of financial support from alumni and friends.
Annual Financial Report FY 2003 (Version 1.0) 7

These strengths, coupled with the Institute's strategic plan, investments, and initiatives, and management's determination to maintain the positive momentum of recent years, position the Institute well for the future.
Robert K. Thompson Senior Vice President Administration and Finance
Annual Financial Report FY 2003 (Version 1.0) 8

Statement of Net Assets

G E O RG IA INS TITU TE O F TE C H NO LO G Y

STATEM E NT O F NET ASSE TS

June 30, 2003

June 30, 2003

ASSETS

Curre nt A sse ts

C a sh a nd C a sh Eq uiv a le nts

$52,185,992.65

S ho rt-te rm Inv e stm e nts

13,064,870.01

A cco unts R e ce iv a b le , ne t

57,205,350.93

Inv e nto rie s

514,735.26

O the r A sse ts

3,837,919.11

T o ta l C urre nt A sse ts

126,808,867.96

Noncurre nt A sse ts Noncurrent C ash Inv e stm e nts No te s R e ce iv a ble , ne t C a p ita l A sse ts, ne t T o ta l No ncurre nt A sse ts TOTAL ASSETS

2,014.11 51,820,526.42
7,205,165.03 725,188,020.14 784,215,725.70 911,024,593.66

LIA BILIT IE S Curre nt Lia bilitie s
A cco unts P a y a b le a nd A ccrue d Lia b ilitie s D e p o sits D eferred Revenue O the r Lia b ilitie s D e p o sits He ld fo r O the r O rg a niza tio ns C o m p e nsa te d A b se nce s (curre nt p o rtio n)
T o ta l C urre nt Lia b ilitie s Noncurre nt Lia bilitie s
C o m p e nsa te d A b se nce s Lo ng -te rm Lia b ilitie s
T o ta l No ncurre nt Lia bilitie s TOTA L LIABILITIES

9,175,867.23 17,078,983.11 26,957,605.54
3,998,070.86 5,282,323.07 14,610,337.46 77,103,187.27
10,871,321.54 552,379.78
11,423,701.32 88,526,888.59

NET ASSETS Inv e ste d in C a p ita l A sse ts, ne t o f re la te d d e b t R e stricte d fo r No ne x pe nda ble Ex pe nda ble C a pita l P ro je cts U nre stricte d TOTAL NET ASSETS

718,942,786.78
43,607,776.38 16,299,343.82
43,647,798.09 $822,497,705.07

Annual Financial Report FY 2003 (Version 1.0) 9

Statement of Revenues, Expenses and Changes in Net Assets

GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2003

June 30, 2003

REVENUES

Operating Revenues

Student Tuition and Fees

$93,226,026.35

Less: Sponsored and Unsponsored Scholarships

(10,956,782.00)

Federal Appropriations

Federal Grants and C ontracts

228,794,222.43

State and Local Grants and C ontracts

8,999,258.21

Nongovernmental Grants and C ontracts

96,480,049.44

Sales and Services of Educational Departments

11,119,484.38

Auxiliary Enterprises

58,430,353.74

Other Operating Revenues

14,068,150.50

Total Operating Revenues

500,160,763.05

EXPENSES

Operating Expenses

Salaries:

Faculty Staff

184,721,337.07 206,678,061.71

Benefits Other Personal Services

76,525,291.40 1,599,093.52

Travel

11,933,243.80

Scholarships and Fellowships

9,284,014.00

Utilities

19,782,978.50

Supplies and Other Services Depreciation

195,858,946.40 41,400,716.77

Total Operating Expenses

747,783,683.17

Operating Income (loss) NONOPERATING REVENUES (EXPENSES)

(247,622,920.12)

State Appropriations

180,721,711.96

Gifts

1,967,883.27

Investment Income (endowments, auxiliary and other) Interest Expense (capital assets)

8,259,710.57 (70,840.60)

Other Nonoperating Revenues

(13,386,835.72)

Net Nonoperating Revenues

177,491,629.48

Income before other revenues, expenses, gains, or loss

(70,131,290.64)

State C apital Appropriations

8,689,838.95

C apital Grants and Gifts

10,843,112.98

Federal Grants & C ontracts

State Grants & C ontracts

Other Grants and C ontracts

46,509.67

Total Other Revenues

19,579,461.60

Increase in Net Assets NET ASSETS

(50,551,829.04)

Net Assets-beginning of year, as originally reported

855,896,633.72

C umulative effect of changes in accounting principle

Prior Year Adjustments

17,152,900.39

Net Assets-beginning of year, restated

873,049,534.11

Net Assets-End of Year

$822,497,705.07

Annual Financial Report FY 2003 (Version 1.0) 10

Statement of Cash Flows
GEORGIA INSTITUTE OF TEC HNOLOGY STATEMENT OF C ASH F LOWS
For the Year Ended June 30, 2003
CA SH F LOWS F ROM OPE RA T ING A CT IVIT IES Tuition and Fe e s Federal A ppropriations G rants and C ontracts (Ex change ) S ale s and S e rv ice s of Educational D e partm e nts Pay m e nts to S upplie rs Pay m e nts to Em ploy e e s Pay m e nts for S cholarships and Fe llowships Loans Issue d to S tude nts and Em ploy e e s C olle ction of Loa ns to S tude nts a nd Em plo y e e s A uxiliary Enterprise C harges: Residence Halls B ookstore Food Services Park ing/Transportation Health S ervice s Inte rcolle giate A thle tics O the r O rganizations O the r R e ce ipts (pay m e nts) Ne t C ash Prov ide d (use d) by O pe rating A ctiv itie s
CA SH F LOWS F ROM NON- CA PIT A L F INA NCING A CT IVIT IE S S tate A ppropriations A ge ncy Funds Transactions G ifts and G rants R e ce iv e d for O the r Than C apital Purpose s Ne t C ash Flows P rov ide d by Non-capital Financing A ctiv itie s
CA SH F LOWS F ROM CA PIT A L A ND RELA T ED F INA NCING A CT IVIT IES C apital G rants and G ifts R e ce iv e d Proce e ds from sale of C apital A sse ts Purchase s of C apital A sse ts Principal Paid on C apital D ebt and Leases Inte re st Paid on C apital D e bt and Le ase s Ne t C ash use d by C apital and R e late d Financing A ctiv itie s
CA SH F LOWS F ROM INVEST ING A CT IVIT IES Proce e ds from S ale s and Maturitie s of Inv e stm e nts Inte re st on Inv e stm e nts Purchase of Investm ents Ne t C ash Prov ide d (use d) by Inv e sting A ctiv itie s Net Increase/Decrease in C ash C ash and C ash Equiv ale nts - B e ginning of y e ar C ash and C ash Equiv ale nts - End of Ye ar

June 30, 2003
$107,736,009.04
316,320,871.99 4,481,418.50
(287,345,839.41) (377,538,605.79)
(9,284,014.00) 38,904.01 97.20
8,741,585.60 904,566.20 727,991.61
3,667,188.29 756,559.68
1,808,739.54 1,108,272.98 20,914,629.91 (206,961,624.65)
180,741,711.96 1,406,247.79 5,262,848.74
187,410,808.49
9,664,625.93
(53,626,342.53) (744,760.34) (70,840.60)
(44,777,317.54)
2,503,969.22 (876,155.21)
1,627,814.01 (62,700,319.69) 114,888,326.45 $52,188,006.76

Annual Financial Report FY 2003 (Version 1.0) 11

Statement of Cash Flows, Continued
RECONCILIA TION OF OPERA TING LOSS TO NET CA SH PROVIDE D (USED) BY OPERATING A CTIVITIES:
Operating Incom e (loss) A djustments to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating Activities
D epreciation C hange in Assets and Liabilities:
Receivables, net I n v e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($247,622,920.12)
41,400,716.77
(7,034,423.24) 52,747.69
2,808,922.37 (1,074,716.32)
352,853.57 2,329,634.65 1,825,559.98
($206,961,624.65)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current A ssets

$52,185,992.65 2,014.11
$52,188,006.76

** NON-C ASH INVESTING, NON-C APITAL FINANC ING, AND C APITAL AND RELATED FINANC ING TRANSAC TIONS

Fixed assets acquired by incurring capital lease obligations

$44,185.12

Annual Financial Report FY 2003 (Version 1.0) 12

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations Georgia Institute of Technology serves the state, and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity Georgia Institute of Technology is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Georgia Institute of Technology as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Georgia Institute of Technology does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Georgia Institute of Technology is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the Institute is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the Institute's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of
Annual Financial Report FY 2003 (Version 1.0) 13

materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
Basis of Accounting For financial reporting purposes, the Institute is considered a special-purpose government engaged only in business-type activities. Accordingly, the Institute's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-Institute transactions have been eliminated.
The Institute has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The Institute has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The Institute accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the Institute's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Consumable supplies are recorded on the consumption method and are valued at cost on the Statement of Net Assets using the average-cost basis.
Annual Financial Report FY 2003 (Version 1.0) 14

Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the Institute's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia (and thus Georgia Institute of Technology) recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Georgia Institute of Technology when complete. For the year ended June 30, 2003, GSFIC transferred capital additions valued at $8,689,838.95 to Georgia Institute of Technology.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in an Institute residence hall, Institute controlled funds held for the disbursement of employee benefits, and other various activities at the Institute.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Annual Financial Report FY 2003 (Version 1.0) 15

Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Georgia Institute of Technology had accrued liability for compensated absences in the amount of $23,656,099.02 as of 7-1-2002. For FY2003, $16,445,422.62 was earned in compensated absences and employees were paid $14,619,862.64, for a net increase of $1,825,559.98. The ending balance as of 6-30-2003 in accrued liability for compensated absences is $25,481,659.00.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The Institute's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the Institute's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The Institute may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the Institute is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the Institute is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the Institute, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus).
Annual Financial Report FY 2003 (Version 1.0) 16

Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Reserve Reserve for Encumbrances Reserve for Inventory O ther Unrestricted Total Unre stricted Net A ssets

June 30, 2003
$11,362,500.51 29,910,755.70 599,306.78 1,775,235.10
$43,647,798.09

When an expense is incurred that can be paid using either restricted or unrestricted resources, the Institute's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes Georgia Institute of Technology, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues The Institute has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the Institute, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the Institute's financial
Annual Financial Report FY 2003 (Version 1.0) 17

statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the Institute has recorded contra revenue for sponsored and unsponsored scholarships.
Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus Georgia Institute of Technology) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus Georgia Institute of Technology), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Annual Financial Report FY 2003 (Version 1.0) 18

Categorization of Deposits
The Institute's cash deposits are categorized by risk as follows:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the Institute or by its agent in the Institute's name.
Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the Institute's name.
Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the Institute's name, and amounts uncollateralized.
Cash Deposits as of June 30, 2003

Cash Deposits Investment Portfolio Accounts
Total Cash Deposits

Carrying Amount
$2,583,445.41 49,604,561.35
$52,188,006.76

Bank Balances
$16,528,016.35 24,568,568.75
$41,096,585.10

Risk Categories

1

2

3

$357,578.95

$0.00 $16,170,437.40 24,568,568.75

$357,578.95

$0.00 $40,739,006.15

Categorization of Investments
The Institute's investments are categorized as to credit risk within the three categories described below:
Category 1 - Insured or registered, or securities held by the Institute or its agent in the Institute's name
Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the Institute's name.
Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the Institute's name.

Annual Financial Report FY 2003 (Version 1.0) 19

At June 30, 2003, the Institute's investments consisted of the following:

Type of Investm e nts
C om m on S tock C orporate Bonds S ecurities and C orporate O bligations

Risk C ategories

1

2

$74,258.31

$0.00

1,715.97

3 $0.00

T o ta ls

$75,974.28

$0.00

$0.00

C arrying Amount
$74,258.31 0.00
1,715.97
$75,974.28

Investm e nts Not S ubject to C ategorizations: Bank of America
Bond Fund C lark Howell Bond Fund B oard of R egents
Total Return Fund Gilbert Trust Fund R eal Estate Office of Treasury and Fiscal Services
G eorgia Extended A sset Pool B ank of A m erica C ertificate of D eposit
Total Investm ents

5,825,115.28 6,601,367.59
37,723,132.67 1,593,478.49 1,458.11
13,029,870.01 35,000.00
$64,885,396.43

Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the Institute did not own any specific, identifiable investment securities of the pool.

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2003.

June 30, 2003

S tude nt Tuition and Fees A uxiliary Ente rprise s and Other O perating A ctivities Federal, S tate, and Private Funds O ther
Less A llowance for D oubtful A ccounts

$762,969.14 1,278,722.74 47,054,796.93 9,995,083.72 59,091,572.53 1,886,221.60

Net A ccounts Receivable

$57,205,350.93

Annual Financial Report FY 2003 (Version 1.0) 20

Note 4. Inventories

Inventories consisted of the following at June 30, 2003.

Physical Plant O ther
T o ta l

June 30, 2003
243,510.86 271,224.40 $514,735.26

Note 5. Notes/Loans Receivable
Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2003 and 2002. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the Institute for amounts cancelled under these provisions. As the Institute determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The Institute has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2003 the allowance for uncollectible loans was approximately $35,000.00.

Annual Financial Report FY 2003 (Version 1.0) 21

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2003.

Capital Assets, Not Being Depreciated: Land & Land Improvements Construction Work-in-Progress Capitalized Collections
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$29,335,742.64 21,667,277.46 3,350,335.00 54,353,355.10

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Total Assets Being Depreciated

36,947,445.78 635,795,935.17
13,736,862.72 272,822,254.66
3,354,070.34 65,423,661.05 1,028,080,229.72

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Total Accumulated Depreciation

7,278,035.72 141,444,451.49
5,653,616.35 160,035,903.15
640,635.29 44,924,075.36 359,976,717.36

Total Capital Assets, Being Depreciated, Net 668,103,512.36

Capital Assets, net

$722,456,867.46

Additions
$660,629.00 17,666,025.62
48,440.00 18,375,094.62

Reductions
$0.00 11,318,853.06
11,318,853.06

Ending Balance 6/30/2003
$29,996,371.64 28,014,450.02 3,398,775.00 61,409,596.66

1,023,637.59 15,425,228.02
156,225.00 30,383,934.96
1,109,331.81 4,554,104.00 52,652,461.38

7,414,208.61
26,102,891.09 1,274,716.04 8,760.66
34,800,576.40

37,971,083.37 643,806,954.58
13,893,087.72 277,103,298.53
3,188,686.11 69,969,004.39 1,045,932,114.70

782,503.54 13,248,848.99
295,525.91 22,972,830.12
319,223.14 3,781,785.07 41,400,716.77
11,251,744.61
$29,626,839.23

2,455,101.65
16,740,817.39 19,063.21 8,760.66
19,223,742.91
15,576,833.49
$26,895,686.55

8,060,539.26 152,238,198.83
5,949,142.26 166,267,915.88
940,795.22 48,697,099.77 382,153,691.22
663,778,423.48
$725,188,020.14

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2003.

June 30, 2003

Prepaid Tuition and Fees Research O the r D eferre d Rev enue

$15,762,812.56 7,104,002.10 4,090,790.88

T o ta ls

$26,957,605.54

Annual Financial Report FY 2003 (Version 1.0) 22

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2003 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2002
$1,252,955.00

Additions $44,185.12

Reductions

Ending Balance June 30, 2003

$744,760.34

$552,379.78

Current Portion
$0.00

Other Liabilities Compensated Absences Other Long Term Liabilities Total

23,656,099.02 23,656,099.02

16,445,422.62 16,445,422.62

14,619,862.64 14,619,862.64

25,481,659.00 0.00
25,481,659.00

14,610,337.46 14,610,337.46

Total Long Term Obligations

$24,909,054.02 $16,489,607.74 $15,364,622.98 $26,034,038.78 $14,610,337.46

Note 9. Lease Obligations

Georgia Institute of Technology is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property.

Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2003, were as follows:

Year Ending June 30:

Year

2004

1

2005

2

2006

3

2007

4

Total m inim um lease paym ents

Less: Interest

Less: Executory costs (if paid)

Principal O utstanding

Real Property

C apital Leases

Operating Leases

$360,473.00 285,345.09 20,510.04 2,863.25 669,191.38 116,811.60

$5,789,171.87 $5,789,171.87

$552,379.78

CAPITAL LEASES

Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2004 and 2007. Expenses for fiscal year 2003 were $815,600.94 of which $70,840.60 represented interest. Total principal paid on capital leases was $744,760.34 for the fiscal year ended June 30, 2003. Interest rates range from 5 percent to 11

Annual Financial Report FY 2003 (Version 1.0) 23

percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2003:

Equipment

$ 3,188,686.11

Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms.

OPERATING LEASES
Georgia Institute of Technology's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2004 through 2005. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment.
Description of Related Party Leases
In 1994, Georgia Institute of Technology entered into a real property operating lease with the Georgia Tech Research Corporation, (GTRC) a related party, for office space renewable each year. The current agreement is for July 1, 2003 through June 30, 2004 for monthly fees of $14,815.50. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay Georgia Tech Research Corporation $177,786.00 in fiscal year 2004.
In 1995, Georgia Institute of Technology entered into a real property operating lease with the Georgia Tech Research Corporation, (GTRC) a related party, for office space renewable each year. The current agreement is for July 1, 2003 through June 30, 2004 for monthly fees of $105,055.82. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay Georgia Tech Research Corporation $1,260,669.84 in fiscal year 2004.
In 1995, Georgia Institute of Technology entered into a real property operating lease with the Georgia Tech Research Corporation, (GTRC) a related party, for office space renewable each year. The current agreement is for July 1, 2003 through June 30, 2004 for monthly fees of $32,248.00. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay Georgia Tech Research Corporation $386,976.00 in fiscal year 2004.
In 2000, Georgia Institute of Technology entered into a real property operating lease with the Georgia Tech Research Corporation, (GTRC) a related party, for office space renewable each year. The current agreement is for July 1, 2003 through June 30, 2004 for monthly fees of
Annual Financial Report FY 2003 (Version 1.0) 24

$15,462.71. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay Georgia Tech Research Corporation $185,552.52 in fiscal year 2004. In 2002, Georgia Institute of Technology entered into a real property operating lease with the Georgia Tech Research Corporation, (GTRC) a related party, for office space renewable each year. The current agreement is for July 1, 2003 through June 30, 2004 for monthly fees of $3,732.47. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay Georgia Tech Research Corporation $44,789.64 in fiscal year 2004. In 2002, Georgia Institute of Technology entered into a real property operating lease with the Georgia Tech Research Corporation, (GTRC) a related party, for office space renewable each year. The current agreement is for July 1, 2003 through June 30, 2004 for monthly fees of $93,622.00. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay Georgia Tech Research Corporation $1,123,464.00 in fiscal year 2004. Noncancellable operating lease expenditures in 2003 were $14,434,968.39 for real property.
Annual Financial Report FY 2003 (Version 1.0) 25

Note 10. Retirement Plans

Teachers Retirement System Of Georgia

Plan Description Georgia Institute of Technology participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Georgia Institute of Technology who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Georgia Institute of Technology makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$15,907,134.52 $14,829,880.57 $18,792,120.88

Regents Retirement Plan

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.

Funding Policy Georgia Institute of Technology makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation.

Annual Financial Report FY 2003 (Version 1.0) 26

Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.
Georgia Institute of Technology and the covered employees made the required contributions of $13,936,579.28 (10.02%) and $6,953,104.25 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description Georgia Institute of Technology participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $788,654.67 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
Georgia Institute of Technology is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Georgia Institute of Technology and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per person and dental coverage up
Annual Financial Report FY 2003 (Version 1.0) 27

to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Georgia Institute of Technology, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Georgia Institute of Technology expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Georgia Institute of Technology (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
Note 13. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the
Annual Financial Report FY 2003 (Version 1.0) 28

group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 1,101 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, Georgia Institute of Technology recognized as incurred $4,274,159.53 of expenditures, which was net of $1,345,730.46 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 29

Note 14. Natural Classifications With Functional Classifications The Institute's operating expenses by functional classification for FY2003 are shown below:

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003
Functional Classification FY2003

Natural Classification

Instruction

Research

Public Service

Academic Support

Faculty Staff B enef it s Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciatio n

$ 77,046,200.15 43,842,139.32 23,465,975.97 547,893.68 2,068,444.19
2,008,241.18 17,410,260.35 3,510,992.72

$ 96,911,258.66 73,950,282.04 29,664,133.51
326,271.00 7,823,901.45
2,398,684.62 96,446,302.83 13,879,834.96

$ 7,099,173.55 12,219,834.08
3,919,307.14 600,058.16
1,075,938.04
759,869.76 26,464,628.42
400,980.41

$ 2,810,681.51 15,634,854.25
4,052,602.41 10,281.55
320,847.65
429,668.78 5,187,315.92 4,512,607.34

Total Expenses

$ 169,900,147.56

$ 321,400,669.07

$ 52,539,789.56

$ 32,958,859.41

Student Services
$ 81,849.45 8,747,944.28 1,722,829.83
44,634.31 209,011.75
188,101.97 7,210,678.10 1,302,164.06
$ 19,507,213.75

Statement of Operating Expenses - Natural vs Func tional Classific ations For the Fiscal Year Ended June 30, 2003

Natural C lassification

Institutio nal Suppo rt

Func tional Classific ation FY 2003

P lant

Operatio ns

Scho larships

A uxiliary

& M aintenance

& Fello wships

Enterprises

Unallo cated Expenses

To tal Expenses

Faculty Staff B enefits P erso nal Services Travel Scho larships and Fello wships Utilities Supplies and Others Services Depreciatio n

$ 537,217.27 20,212,065.44
6,445,415.44 68,324.82 243,534.21
399,226.57 2,941,432.74 11,335,862.11

$ 234,956.48 20,337,230.68
4,782,228.65 1,630.00 75,180.16
8,623,855.05 15,904,974.27
2,152,860.45

$ 0.00 9,284,014.00

$ 0.00 $ 11,733,711.62 2,472,798.45

$ 0.00

116,386.35

4,975,330.57 24,293,353.77
4,305,414.72

$ 184,721,337.07 206,678,061.71 76,525,291.40 1,599,093.52 11,933,243.80 9,284,014.00 19,782,978.50 195,858,946.40 41,400,716.77

To tal Expenses

$ 42,183,078.60

$ 52,112,915.74

$ 9,284,014.00

$ 47,896,995.48

$ 0.00

$ 747,783,683.17

Annual Financial Report FY 2003 (Version 1.0) 30

THE UNIVERSITY OF GEORGIA
Financial Report
For the Year Ended June 30, 2003

The University of Georgia Athens, Georgia

Michael F. Adams
President

Henry M. Huckaby
Senior Vice President For Finance & Administration

THE UNIVERSITY OF GEORGIA ANNUAL FINANCIAL REPORT
FY 2003
Table of Contents
Management's Discussion and Analysis ..................................................................................... 1 Statement of Net Assets ............................................................................................................... 8 Statement of Revenues, Expenses and Changes in Net Assets.................................................... 9 Statement of Cash Flows ........................................................................................................... 10 Note 1. Summary of Significant Accounting Policies ............................................................. 12 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments.................................... 17 Note 3. Accounts Receivable................................................................................................... 19 Note 4. Inventories................................................................................................................... 20 Note 5. Notes/Loans Receivable.............................................................................................. 20 Note 6. Capital Assets.............................................................................................................. 21 Note 7. Deferred Revenue........................................................................................................24 Note 8. Long-Term Liabilities ................................................................................................. 22 Note 9. Lease Obligations........................................................................................................ 22 Note 10. Retirement Plans ....................................................................................................... 24 Note 11. Risk Management...................................................................................................... 26 Note 12. Contingencies............................................................................................................. 26 Note 13. Post-Employment Benefits Other Than Pension Benefits ........................................ 27 Note 14. Natural Classifications With Functional Classifications........................................... 28

THE UNIVERSITY OF GEORGIA
Management's Discussion and Analysis

Introduction

The University of Georgia was incorporated by an act of the General Assembly on January 27, 1785. Georgia became the first state to charter a state-supported university.

The University of Georgia, a land grant and sea-grant university with statewide commitments and responsibilities, is the state's flagship institution of higher education. It is also the state's oldest, most comprehensive, and most diversified institution of higher education. Its motto, "to teach, to serve, and to inquire into the nature of things," reflects the University's integral and unique role in the conservation and enhancement of the state's and nation's intellectual, cultural, and environmental heritage. As a comprehensive land-grant and sea-grant institution, the University of Georgia offers baccalaureate, master's, doctoral and professional degrees in the arts, humanities, social sciences, biological sciences, physical sciences, agricultural and environmental sciences, business, environmental design, family and consumer sciences, forest resources, journalism and mass communication, education, law, pharmacy, social work, and veterinary medicine.

The student population continues to grow, increasing by almost 1,700 students over a three-year period, while the number of faculty have remained basically the same.

Faculty

Students

FY2003 FY2002 FY2001

1,790 1,801 1,787

32,941 32,317 31,288

Overview of the Financial Statements and Financial Analysis
The University of Georgia presents its financial statements for fiscal year 2003. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY2002 and FY2003. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows.
Statement of Net Assets
The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point in time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a
Annual Financial Report FY 2003 (Version 1.0) 1

fiscal snapshot of The University of Georgia. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements.

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes its vendors.

Finally, the Statement of Net Assets provides a picture of net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant, and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets

June 30, 2003
$202,276,233.22 735,506,964.43 43,800,757.30 981,583,954.95

June 30, 2002
$219,712,465.38 643,853,721.60 43,198,586.15 906,764,773.13

Lia b ilitie s : C urre nt Liabilities Noncurrent Liabilities Total Liabilities

125,526,706.68 36,628,221.08
162,154,927.76

122,812,183.55 13,452,355.45
136,264,539.00

Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonex pendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets

712,117,109.22 37,440,283.45 17,789,347.60 1,453,854.98 50,628,431.94
$819,429,027.19

630,584,656.58 35,976,620.61 18,677,273.86 578,152.14 84,683,530.94
$770,500,234.13

Total assets of the institution increased by $74,819,181.82. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $92,000,000.00 in capital assets, net of accumulated depreciation, while current assets decreased slightly.
Annual Financial Report FY 2003 (Version 1.0) 2

Total liabilities at year-end increased by $25,890,388.76. The increase was primarily in noncurrent liabilities, reflecting an increase in capital debt. The combination of the increase in total assets of $74,819,181.82 and the increase in total liabilities of $25,890,388.76 yields an increase in total net assets of $48,928,793.06.

Statement of Revenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of this statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, and gains and losses received or spent by the institution. Generally speaking, operating revenues are received for goods and services provided to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example, state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30, 2003

Operating Revenues Operating Expenses Operating Loss

$487,517,603.79 947,017,351.62 (459,499,747.83)

June 30, 2002
$443,353,346.48 854,112,545.05 (410,759,198.57)

Nonoperating Revenues and Expenses

424,986,806.06

460,662,870.82

Incom e (Loss) Before other revenues, expenses, gains or losses
Other revenues, expenses, gains or losses

(34,512,941.77) 68,239,927.95

49,903,672.25 16,739,663.98

Increase in Net Assets
Net Assets at beginning of year, as originally reported C umulative effect of changes in accounting principle Prior Year Adjustm ents Net Assets at beginning of year, restated

33,726,986.18
770,500,234.13
15,201,806.88 785,702,041.01

66,643,336.23
1,502,581,630.17 798,724,732.27
703,856,897.90

Net Assets at End of Year

$819,429,027.19

$770,500,234.13

Additional detail of revenues and expenses is provided in the following schedules:

Annual Financial Report FY 2003 (Version 1.0) 3

Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

June 30, 2003

Operating Revenue Tuition and Fees G rants and C ontracts Sales and S ervices of Educational D epartm A ux ilia r y O the r

$133,522,858.62 211,190,873.58 11,529,211.23 81,325,866.62 49,948,793.74

Total Operating Revenue

487,517,603.79

Nonoperating Revenue State A ppropriations G ifts Investment Income G rants and C ontracts O the r

412,856,623.55 7,111,340.11 3,110,243.19
10,696,415.90 3,334,895.25

Total Nonoperating Revenue

437,109,518.00

C apital G ifts and Grants State C apital Appropriations Other C apital G ifts and Grants

1,180,083.95 56,363,428.10

Total C apital G ifts and G rants

57,543,512.05

Total Revenues

$982,170,633.84

June 30, 2002
$120,322,913.54 192,286,365.81 10,580,848.54 72,427,670.13 47,735,548.46
443,353,346.48
445,165,124.00 8,189,791.81 3,950,013.43
4,177,136.91
461,482,066.15
15,807,295.85 932,368.13
16,739,663.98 $921,575,076.61

Annual Financial Report FY 2003 (Version 1.0) 4

Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses

June 30, 2003
$189,767,227.29 270,472,235.43 143,308,380.64 84,232,013.27 23,934,591.67 71,101,717.23 65,955,430.91 20,672,114.67 77,573,640.51
947,017,351.62

Nonoperating Expenses Interest Expense (C apital Assets)

1,426,296.04

Total Expenses

$948,443,647.66

June 30, 2002
$180,533,559.11 226,795,597.82 130,172,029.37 77,917,492.74 19,624,794.39 71,025,193.12 60,434,410.48 17,795,613.42 69,813,854.60
854,112,545.05
819,195.33
$854,931,740.38

Tuition and fees increased by $13 million from fiscal year 2002 to fiscal year 2003, a result of a 6% increase in general tuition, increased out-of-state fees, and small increases in mandatory fees applied to an increased student enrollment. Contracts and grants revenues increased from approximately $192 million in fiscal year 2002 to approximately $211 million in fiscal year 2003, continuing a trend of increased research activity at the University. Auxiliary revenues increased by $8.9 million (approximately 11%), mostly attributable to increased revenues from implementing a new parking plan and from increased participation in Food Services meal plan options. In the non-operating revenue categories, state appropriations decreased from $445 million to $413 million, indicative of a series of budget reductions related to lagging state revenues. Fiscal year 2003 non-operating grants and contracts reflect $10.7 million as compared to zero dollars in fiscal year 2002. This is simply a case of better identification of exchange versus non-exchange revenues required under the new GASB reporting requirements. State capital appropriations shows a significant decrease, from almost $16 million in fiscal year 2002 to $1.2 million in fiscal year 03, which is a result of a difference in classification of MRR funds to the state appropriations category in fiscal year 2003. Finally, the Other Capital/Gifts/Grants category for fiscal year 2003 reflects $56 million in funds expended by the University of Georgia Athletic Association on athletic facilities owned by the University.

Annual Financial Report FY 2003 (Version 1.0) 5

Statement of Cash Flows The final statement presented by the University of Georgia is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Year Ended June 30, 2003 Condensed

C ash Provided (used) By: Operating A ctivities Non-capital Financing Activities Investing Activities C apital and Related Financing A ctivities

June 30, 2003
($ 4 0 7 ,2 7 5 ,5 4 5 .9 3 ) 4 3 5 ,1 9 4 ,2 4 8 .8 4 (4 1 ,1 7 2 ,2 1 2 .4 7 ) (5 8 ,3 0 7 ,4 1 8 .1 0 )

Net C hange in C ash C ash, Beginning of Year C ash, End of Year

(7 1 ,5 6 0 ,9 2 7 .6 6 ) 1 6 8 ,1 0 9 ,0 5 8 .5 9 $ 9 6 ,5 4 8 ,1 3 0 .9 3

Capital Assets
The University added several significant facilities in fiscal year 2003, including the Fanning Leadership Center; Phase I of the D. W. Brooks Drive Infrastructure and Pedestrian Mall; and several projects funded by the University of Georgia Athletic Association, including an Academic Achievement Center; improvements to Gate 6 at Sanford Stadium; expansion to the South Sky Suites at Sanford Stadium; and construction of an indoor range and training facility at the University of Georgia Golf Course.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Annual Financial Report FY 2003 (Version 1.0) 6

Economic Outlook The University of Georgia enters fiscal year 2004 with a state funding base that is approximately $48.5 million (11.6%) less than in fiscal year 2002. In order to meet these budget reductions, the University was forced in fiscal year 2003 to limit hiring to mission-critical positions and to defer filling of more that 1,100 vacant positions including:
340 faculty lines (200 of which would provide direct instruction) 400 Graduate Assistants 425 support positions Further reductions are anticipated in fiscal year 2004 (and beyond) as state revenue collections continue to lag. A tuition increase of 15% ($209/semester) will generate approximately $16 million in new Resident Instruction revenues, which will help soften the impact of further cuts. However, the cumulative effort of prior cuts, and those anticipated, will negatively impact University operations, and will require a strict program-by-program review as the University seeks to preserve those functions related to its three-part mission: teaching, research, and service.
_______________________ Michael F. Adams, President The University of Georgia
Annual Financial Report FY 2003 (Version 1.0) 7

Statement of Net Assets
TH E U NIV E RS ITY O F G E O RG IA STATEM ENT O F NET ASSETS June 30, 2003
ASSETS Curre nt A sse ts C a sh a nd C a sh Eq uiv a le nts S ho rt-te rm Inv e stm e nts A cco unts R e ce iv a b le , ne t Inv e nto rie s O the r A sse ts T o ta l C urre nt A sse ts
Noncurre nt A sse ts Noncurrent C ash Inv e stm e nts No te s R e ce iv a b le , ne t C a p ita l A sse ts, ne t T o ta l No ncurre nt A sse ts TOTAL ASSETS
LIA BILITIES Curre nt Lia bilitie s A cco unts P a y a b le a nd A ccrue d Lia bilitie s D e po sits D eferred Revenue O the r Lia b ilitie s D e p o sits He ld fo r O the r O rg a niza tio ns C o m p e nsa te d A b se nce s (curre nt p o rtio n) T o ta l C urre nt Lia b ilitie s Noncurre nt Lia bilitie s C o m pe nsa te d A bse nce s Lo ng-te rm Lia bilitie s T o ta l No ncurre nt Lia b ilitie s TOTAL LIABILITIES

June 30, 2003
$94,734,223.65 45,581,847.78 50,309,589.90 8,434,203.38 3,216,368.51
202,276,233.22
1,813,907.28 31,264,040.71 10,722,809.31 735,506,964.43 779,307,721.73 981,583,954.95
15,516,918.07 1,143,450.00
74,077,533.22 1,641,609.50
11,358,433.18 21,788,762.71 125,526,706.68
14,433,984.77 22,194,236.31 36,628,221.08 162,154,927.76

NET ASSETS Inv e ste d in C a p ita l A sse ts, ne t o f re la te d d e b t R e stricte d fo r No ne x pe nda b le Ex pe nda b le C a p ita l P ro je cts U nre stricte d TOTAL NET ASSETS

712,117,109.22
37,440,283.45 17,789,347.60
1,453,854.98 50,628,431.94 $819,429,027.19

Annual Financial Report FY 2003 (Version 1.0) 8

Statement of Revenues, Expenses and Changes in Net Assets

THE UNIVERSITY OF GEORGIA STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2003

June 30, 2003

REVENUES

Operating Revenues

Student Tuition and Fees

$171,857,857.13

Less: Sponsored and Unsponsored Scholarships

(38,334,998.51)

Federal Appropriations

11,179,824.24

Federal Grants and Contracts

119,302,427.45

State and Local Grants and Contracts

30,698,152.72

Nongovernmental Grants and Contracts

61,190,293.41

Sales and Services of Educational Departments

11,529,211.23

Auxiliary Enterprises

81,325,866.62

Other Operating Revenues

38,768,969.50

Total Operating Revenues

487,517,603.79

EXPENSES

Operating Expenses

Salaries:

Faculty

118,990,022.95

Staff

385,972,253.91

Benefits

127,796,481.33

Other Personal Services

Travel

10,550,822.68

Scholarships and Fellowships

23,541,273.38

Utilities

25,956,680.09

Supplies and Other Services

201,402,934.12

Depreciation

52,806,883.16

Total Operating Expenses

947,017,351.62

Operating Income (loss) NONOPERATING REVENUES (EXPENSES)

(459,499,747.83)

State Appropriations

412,856,623.55

Gifts

7,111,340.11

Investment Income (endowments, auxiliary and other)

3,110,243.19

Interest Expense (capital assets)

(1,426,296.04)

Other Nonoperating Revenues

3,334,895.25

Net Nonoperating Revenues

424,986,806.06

Income before other revenues, expenses, gains, or loss

(34,512,941.77)

State Capital Appropriations

1,180,083.95

Capital Grants and Gifts

56,363,428.10

Federal Grants & Contracts

State Grants & Contracts

Other Grants and Contracts

10,696,415.90

Total Other Revenues

68,239,927.95

Increase in Net Assets NET ASSETS

33,726,986.18

Net Assets-beginning of year, as originally reported

770,500,234.13

Cumulative effect of changes in accounting principle

Prior Year Adjustments

15,201,806.88

Net Assets-beginning of year, restated

785,702,041.01

Net Assets-End of Year

$819,429,027.19

Annual Financial Report FY 2003 (Version 1.0) 9

Statement of Cash Flows
THE UNIVERSITY OF GEORGIA STATEMENT OF C ASH FLOWS For the Year Ended June 30, 2003
CA SH F LOWS F ROM OPE RA TING A CTIVITIES Tuition and Fees Federal Appropriations G rants and C ontracts (Exchange) Sales and Services of Educational D epartments Paym ents to Suppliers Paym ents to Em ployees Paym ents for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Em ployees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities
CA SH F LOWS F ROM NON- CA PITA L F INA NCING A CTIVIT IE S State Appropriations Agency Funds Transactions G ifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing A ctivities
CA SH F LOWS F ROM CA PIT A L A ND RELA TED F INA NCING A CTIVITIES C apital G rants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities
CA SH F LOWS F ROM INVESTING A CT IVITIES Proceeds from Sales and Maturities of Investments Interest on Investm ents Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003
$131,394,184.56 9,352,428.59
194,021,868.52 27,600,493.84
(341,316,782.71) (504,943,508.79)
(18,012,697.64) (1,848,383.00) 2,785,385.22
19,334,275.83 12,648,952.12 19,614,260.46 19,630,635.31 12,901,877.62
3,750,713.11 5,810,751.03 (407,275,545.93)
415,856,623.55 2,681,335.34
16,656,289.95 435,194,248.84
4,900,000.00 50,858.29
(60,830,590.81) (1,001,389.54) (1,426,296.04)
(58,307,418.10)
163,821,253.00 4,046,135.16
(209,039,600.63) (41,172,212.47) (71,560,927.66) 168,109,058.59 $96,548,130.93

Annual Financial Report FY 2003 (Version 1.0) 10

Statement of Cash Flows, Continued
RECONCILIA TION OF OPERA TING LOSS TO NET CA SH PROVIDE D (USED) BY OPERATING A CTIVITIES:
Operating Incom e (loss) A djustments to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating Activities
D epreciation C hange in Assets and Liabilities:
Receivables, net I n v e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($459,499,747.83)
52,806,883.16
(7,426,757.40) 172,079.76 (194,311.45) 705,758.37
4,769,693.86 1,158,434.89
232,420.71
($407,275,545.93)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current A ssets

$94,734,223.65 1,813,907.28
$96,548,130.93

** NON-C ASH INVESTING, NON-C APITAL FINANC ING, AND C APITAL AND RELATED FINANC ING TRANSAC TIONS
Fixed assets acquired by incurring capital lease obligations C hange in fair value of investm ents recognized as a com ponent of interest i C hange in interest receivable affecting interest received G ift of capital assets reducing proceeds of capital grants and gifts

$9,002,834.00 $453,971.17 $439,413.78
$52,240,736.15

Annual Financial Report FY 2003 (Version 1.0) 11

THE UNIVERSITY OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations The University of Georgia serves the state, and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity The University of Georgia is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of the University of Georgia as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. The University of Georgia does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, the University of Georgia is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of
Annual Financial Report FY 2003 (Version 1.0) 12

materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
Basis of Accounting For financial reporting purposes, the University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-university transactions have been eliminated.
The university has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The university has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Consumable supplies are carried at the average cost basis. Resale Inventories are valued at cost using the average-cost basis.
Annual Financial Report FY 2003 (Version 1.0) 13

Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to the University of Georgia when complete. The balance of construction in progress retained by GSFIC totaled $47,887,229.04 at June 30, 2003.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. The University of Georgia had accrued liability for compensated absences in the amount of $35,990,326.77 as of 7-1-2002. For FY2003, $24,722,951.05 was earned in compensated absences and employees were paid $24,490,530.54 for a net increase of $232,421.71. The ending balance as of 6-30-2003 in accrued liability for compensated absences is $36,222,747.48.
Annual Financial Report FY 2003 (Version 1.0) 14

Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The University's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.
Annual Financial Report FY 2003 (Version 1.0) 15

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Reserve Reserve for Encumbrances Reserve for Inventory O ther Unrestricted Total Unre stricted Net A ssets

June 30, 2003
$6,052,873.62 26,980,700.62
1,487,000.00 16,107,857.70 $50,628,431.94

When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.

Income Taxes The University of Georgia, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.

Classification of Revenues The University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:

Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.

Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.

Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships.

Annual Financial Report FY 2003 (Version 1.0) 16

Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus the University of Georgia) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-1759:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus the University of Georgia), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Annual Financial Report FY 2003 (Version 1.0) 17

Categorization of Deposits
The University's cash deposits are categorized by risk as follows:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the University or by its agent in the University's name.
Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University's name.
Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the University's name, and amounts uncollateralized.
Cash Deposits as of June 30, 2003

Cash Deposits Investment Portfolio Accounts
Total Cash Deposits

Carrying Amount
$36,231,865.56

Bank Balances
$91,935,498.26 0.00

Risk Categories

1

2

3

$236,108.49 $91,699,389.77 $0.00

$36,231,865.56 $91,935,498.26 $236,108.49 $91,699,389.77 $0.00

Categorization of Investments

The University's investments are categorized as to credit risk within the three categories described below:

Category 1 - Insured or registered, or securities held by the University or its agent in the University's name

Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name.

Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University's name.

Annual Financial Report FY 2003 (Version 1.0) 18

At June 30, 2003, the University's investments consisted of the following:

Note 2b C ategorization of Investm ents
Ty pe of Investm ents C om m on S tock C orporate B onds U.S . G overnm ent S ecurities and C orporate O bligations

Risk C ategories

1

2

3

$944,308.54 6,934,135.58
46,083,702.11

$0.00

$0.00

T o ta ls

$53,962,146.23

$0.00

$0.00

C arrying Amount
$944,308.54 6,934,135.58 46,083,702.11
$53,962,146.23

Investm ents Not S ubject to C ategorizations: B oard of Regents
S hort-Term Fund Balanced Income Fund Total R eturn Fund Investm ent Portfolio A ccounts Mutual Funds R eal Estate S tate Investm ent Pool Investm ent in G HEA C Loans
Total Investm ents

55,265,657.28
22,642,672.87 240,469.38
1,652,789.50 600.00
$133,764,335.26

Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool.
Note 3. Accounts Receivable
Accounts receivable consisted of the following at June 30, 2003.

S tudent Tuition and Fees A uxiliary Enterprises and O ther Operating A ctiv ities Federal, S tate, and Private Funds O ther
Less A llowance for D oubtful A ccounts

$1,792,328.22 8,707,868.28
39,642,016.47 979,022.66
51,121,235.63 811,645.73

Net A ccounts Receivable

$50,309,589.90

Annual Financial Report FY 2003 (Version 1.0) 19

Note 4. Inventories

Inventories consisted of the following at June 30, 2003.

B ookstore Food Services Physical Plant O ther
T o ta l

June 30, 2003
$5,053,209.81 789,081.34
1,132,578.54 1,459,333.69
$8,434,203.38

Note 5. Notes/Loans Receivable
Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2003 and 2002. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The University has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2003 the allowance for uncollectible loans was approximately $676,538.26.

Annual Financial Report FY 2003 (Version 1.0) 20

Note 6. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2003.

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$16,503,497.32 8,765,974.56
25,269,471.88

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

30,386,997.00 678,844,536.71
17,562,551.00 278,114,457.36
1,826,017.35 155,725,076.22
6,403,773.93 1,168,863,409.57

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

10,290,345.56 227,720,382.77
7,165,715.56 193,106,921.10
495,337.86 111,500,457.00
550,279,159.85

Total Capital Assets, Being Depreciated, Net 618,584,249.72

Capital Assets, net

$643,853,721.60

Additions
$0.00 40,853,198.98 40,853,198.98
5,106,872.86 38,617,941.98 35,953,724.86 27,405,202.47
1,619,423.63 11,966,260.67
1,908,108.00 122,577,534.47
1,217,923.75 21,503,128.87
4,967,734.83 21,981,210.45
271,326.71 8,323,398.00
58,264,722.61
64,312,811.86
$105,166,010.84

Reductions
$0.00 8,197,855.20 8,197,855.20

Ending Balance 6/30/2003
$16,503,497.32 41,421,318.34 57,924,815.66

2,872,336.00 2,115,880.02 10,931,370.04
159,154.00 16,078,740.06

32,621,533.86 715,346,598.67
53,516,275.86 294,588,289.79
3,445,440.98 167,532,182.89
8,311,881.93 1,275,362,203.98

676,771.30 (469,203.86) 10,397,105.81 159,154.00 10,763,827.25 5,314,912.81 $13,512,768.01

10,831,498.01 249,692,715.50
12,133,450.39 204,691,025.74
766,664.57 119,664,701.00
0.00 597,780,055.21
677,582,148.77
$735,506,964.43

Annual Financial Report FY 2003 (Version 1.0) 21

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2003.

Prepaid Tuition and Fees Research O ther D eferred Revenue
T o ta ls

June 30, 2003
$15,715,033.73 29,232,982.16 29,129,517.33
$74,077,533.22

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2003.

Leases Lease Obligations

Beginning Balance July 1, 2002

Additions

$13,452,355.45 $10,774,222.95

Reductions

Ending Balance June 30, 2003

$938,716.74 $23,287,861.66

Current Portion
$1,093,625.35

Other Liabilities Compensated Absences (a Other Long Term Liabilities Total

35,990,326.77 35,990,326.77

24,722,951.05 24,722,951.05

24,490,530.34 24,490,530.34

36,222,747.48 0.00
36,222,747.48

21,788,762.71 21,788,762.71

Total Long Term Obligations $49,442,682.22 $35,497,174.00 $25,429,247.08 $59,510,609.14 $22,882,388.06

(a) The beginning balance includes the amount shown as current FY2002 and reclassified as long-term in FY2003.

Note 9. Lease Obligations
The University of Georgia is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property.
Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2003, were as follows:

Annual Financial Report FY 2003 (Version 1.0) 22

Lease Obligat ions

Year Ending June 30:

Year

2004

1

2005

2

2006

3

2007

4

2008 2009 through 2013 2014 through 2018 2019 through 2023 2024 through 2028

5 6-10 11-15 16-20 21-25

2029 through 2033

26-30

2034 through 2038

31-35

2039 through 2043

36-40

Total m inim um lease paym e nts

Less: Interest Less: Executory costs (if paid) Principal O utstanding

Real Property

C apital Leases

Operating Leases

$2,823,436.61 2,598,970.33 2,381,782.79 2,395,449.08 2,393,454.00
10,292,548.02 8,369,999.80 8,369,999.80 8,369,999.80 5,431,666.54

$2,071,433.85 28,446.20 17,869.80 4,467.45

53,427,306.77 28,869,301.11
1,270,144.00 $23,287,861.66

$2,122,217.30

CAPITAL LEASES
The University of Georgia is obligated under various operating leases for the uses of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property.
The University of Georgia occupies three real properties and holds various equipment items under capital leases. One of the real property leases expires in 2011, one in 2031, and the other in 2032. The equipment capital leases expire between 2004 and 2009. Expenditures for fiscal year 2003 were $3,426,748.48, of which $808,046.58 represented interest and $2,618,701.90 represented principal paid on capital leases. Interest rates range from 2.25 percent to 8.36 percent. The carrying values of assets held under capital lease, including the current liability portion, at June 30, 2003 were $23,287,861.66.
All three of the University of Georgia's current real property capital leases are with the University of Georgia Real Estate Foundation (UGAREF), a related entity. In June of 2001, the University of Georgia entered into a capital lease with the UGAREF whereby the University leases a building for a 10-year period that began June 1, 2001 and expires June 30, 2011. In August of 2001, the University of Georgia entered into a second capital lease with the UGAREF, whereby the University leases the Carlton Street Parking Deck for a 30-year period that began September 30, 2001 and expires August 31, 2031. In November of 2002, the University of Georgia entered into the third capital lease with the UGAREF whereby leases the East Village Parking Deck for a 30-year period that began on November 1, 2002 and expires December 1, 2032. The outstanding liability at June 30, 2003 on these capital leases is $12,580,386.90.
Annual Financial Report FY 2003 (Version 1.0) 23

OPERATING LEASES
The University of Georgia is Lessee under a number of one-year operating leases, which generally provide for four (4) renewal option periods. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Properties are leased for a variety of functions, from farm acreage to office space to parking lots.
Non-cancelable operating lease expenditures in 2003 were $1,674,553.96 for real property.

Note 10. Retirement Plans

Teachers Retirement System Of Georgia

Plan Description The University of Georgia participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of the University of Georgia who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The University of Georgia makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$29,871,955.92 $29,156,597.85 $35,340,368.14

Regents Retirement Plan

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia.
Annual Financial Report FY 2003 (Version 1.0) 24

Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.
Funding Policy The University of Georgia makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statue and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.
The University of Georgia and the covered employees made the required contributions of $9,604,933.47 (10.02%) and $4,792,874.72 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description The University of Georgia participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $1,238,382.84 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Annual Financial Report FY 2003 (Version 1.0) 25

Note 11. Risk Management
The University of Georgia is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. The University of Georgia and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. The University of Georgia, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although the University of Georgia expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against the University of Georgia (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to
Annual Financial Report FY 2003 (Version 1.0) 26

be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 3,246 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, the University of Georgia recognized as incurred $13,242,907.54 of expenditures, which was net of $5,011,646.03 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 27

Note 14. Natural Classifications With Functional Classifications The University's operating expenses by functional classification for FY2003 are shown below

Statement of Operating Expenses - Natural vs Func tional Classific ations For the Fisc al Y ear Ended June 30, 2003
Func tional Classific ation FY 2003

Natural C lassification

Instruction

Research

Public Service

Academic Support

F ac ult y Staff B enefits P erso nal Services Travel Scho larships and Fello wships Ut ilit ies Supplies and Others Services Depreciatio n

$ 70,841,288.01 59,398,161.92 25,053,660.63
2,049,793.90 2,149,261.96 1,443,801.53 16,293,918.46 12,537,340.88

$ 45,077,473.34 99,770,263.83 29,938,667.21
4,617,766.28 1,141,165.86 1,331,659.94
74,459,965.45 14,135,273.52

$ 1,826,086.91 77,799,254.21 23,502,688.38
2,742,177.30 34,286.71
1,315,823.34 30,199,723.56 5,888,340.23

$ 950,886.09 41,420,336.74
9,741,745.34
488,026.37
624,166.50 19,375,308.77 11,631,543.46

To tal Expenses

$ 189,767,227.29

$ 270,472,235.43

$ 143,308,380.64

$ 84,232,013.27

Student Services
$ 246,530.50 11,311,900.50 2,557,984.15
202,660.24
221,766.71 8,663,789.91
729,959.66
$ 23,934,591.67

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003

Natural Classification

Institutio nal Suppo rt

Functional Classification FY2003

P lant

Operat io ns

Scho larships

A uxiliary

& M aintenance

& Fellowships

Enterprises

Unallo cated Expenses

To t al Expenses

Faculty Staff B enef it s Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciatio n

$ 0.00 38,471,211.89 21,823,529.81
310,532.88
465,981.99 8,477,831.58 1,552,629.08

$ 0.00 27,526,648.95
7,946,271.48
16,874.41
16,237,067.94 12,200,838.75 2,027,729.38

$ 0.00 455,555.82 20,216,558.85

$ 47,758.10 30,274,475.87
6,776,378.51

$ 0.00

122,991.30

4,316,412.14 31,731,557.64 4,304,066.95

$ 118,990,022.95 385,972,253.91 127,796,481.33
0.00 10,550,822.68 23,541,273.38 25,956,680.09 201,402,934.12 52,806,883.16

Total Expenses

$ 71,101,717.23

$ 65,955,430.91

$ 20,672,114.67

$77,573,640.51 $0.00

$ 947,017,351.62

Annual Financial Report FY 2003 (Version 1.0) 28

UNIVERSITY SYSTEM OFFICE
Financial Report
For the Year Ended June 30, 2003

University System Office Board of Regents of the University System of Georgia
Atlanta, Georgia

Dr. Thomas C. Meredith
Chancellor

William R. Bowes
Vice Chancellor for Fiscal Affairs/Treasurer
Debra J. Lasher
Executive Director for Business & Financial Affairs

UNIVERSITY SYSTEM OFFICE ANNUAL FINANCIAL REPORT
FY 2003
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 8 Statement of Revenues, Expenses and Changes in Net Assets............................................ 9 Statement of Cash Flows ................................................................................................... 10 Note 1 Summary of Significant Accounting Policies ...................................................... 12 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 17 Note 3 Accounts Receivable............................................................................................. 19 Note 4 Inventories............................................................................................................. 20 Note 5 Notes/Loans Receivable........................................................................................ 20 Note 6 Capital Assets........................................................................................................ 21 Note 7 Deferred Revenue.................................................................................................. 22 Note 8 Long-Term Liabilities ........................................................................................... 22 Note 9 Lease Obligations.................................................................................................. 22 Note 10 Retirement Plans ................................................................................................. 24 Note 11 Risk Management................................................................................................ 25 Note 12 Contingencies...................................................................................................... 26 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 27 Note 14 Natural Classifications With Functional Classifications..................................... 28

UNIVERSITY SYSTEM OFFICE
Management's Discussion and Analysis
Introduction
The University System Office of Georgia's Board of Regents was created in 1931 as a part of a reorganization of Georgia's state government. With this act, public higher education in Georgia was unified for the first time under a single governing and management authority. The governor appoints members to the Board, who each serve seven years. Today the Board of Regents is composed of 18 members, five of whom are appointed from the state-at-large, and one from each of the 13 congressional districts. The Board elects a chancellor who serves as its chief executive officer and the chief administrative officer of the University System. The Board oversees 34 institutions: four research institutions, 2 regional universities, 13 state universities, 2 state colleges, and 13 two-year colleges. In addition one marine research facility is governed by the Board. These institutions enroll more than 200,000 students and employ more than 9,000 faculty and 30,000 employees to provide teaching and related services to students and the communities in which they are located.
Overview of the Financial Statements and Financial Analysis
The University System Office is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the System Office's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2002 and FY 2003.
Statement of Net Assets
The Statement of Net Assets presents the assets, liabilities, and net assets of the University System Office as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of the University System Office. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements.
From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.
Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's
Annual Financial Report FY 2003 (Version 1.0) 1

equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

Assets: C urrent Assets C apital Assets, net Other Assets Total Assets

June 30, 2003
$74,446,419.95 14,867,673.92 7,853,749.28 97,167,843.15

June 30, 2002
$99,787,621.37 13,643,687.10
113,431,308.47

Liabilities: C urrent Liabilities Noncurrent Liabilities Total Liabilities

22,719,093.65 2,670,577.03
25,389,670.68

32,756,089.39 32,756,089.39

Net Assets: Invested in C apital Assets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects Unrestricted Total Net Assets

12,157,270.22 10,401,422.84
1,123,409.10
48,096,070.31 $71,778,172.47

13,643,687.10
1,719,556.54
65,311,975.44 $80,675,219.08

The total assets of the institution decreased by ($16,263,465.32). The cause for $10 million of the decrease is a difference in the reporting of the corpus amounts for Endowments and Eminent Scholars. In FY 2002 this amount was reported in Cash and Cash Equivalents. In FY 2003 this amount was reported in Net Assets, Restricted for Nonexpendable. In addition a reduction of approximately $7 million in State Appropriations resulted in decreased cash for FY 2003. See Note 1 in the notes to the financial statements for additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets.
The total liabilities for the year decreased by ($7,366,418.71). There are two primary activities involved in the total liability decrease: A decrease of $9 million related to the health insurance Incurred But Not Reported liability due to faster electronic claims processing by the vendor and an increase due to the addition of two new lease purchase obligations of $3.3 million.

Annual Financial Report FY 2003 (Version 1.0) 2

Statement of Revenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

Operating Revenues Operating Expenses Operating Loss
Nonoperating Revenues and Expenses
Income (Loss) Before other revenues, expenses, gains or losses
Other revenues, expenses, gains or losses
Increase in Net Assets
Net Assets at beginning of year, as originally reported Cumulative effect of changes in accounting principle Prior Year Adjustments Net Assets at beginning of year, restated
Net Assets at End of Year

June 30, 2003 $239,157,104.08
405,949,601.64 (166,792,497.56) 152,276,777.79
(14,515,719.77) 1,013,910.34
(13,501,809.43) 80,675,219.08
4,604,762.82 85,279,981.90 $71,778,172.47

June 30, 2002 $217,950,733.26
359,421,677.51 (141,470,944.25) 160,479,011.60
19,008,067.35 3,724,221.10
22,732,288.45 213,965,544.17 156,022,613.54
57,942,930.63 $80,675,219.08

The Statement of Revenues, Expenses, and Changes in Net Assets as stated above reflects a decrease in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:
The primary cause for this decrease in Net Assets at the End of the Year is once again a reduction in State Appropriations, Non-Operating Revenue of approximately $7 million. Operating Revenues increased due to increased health insurance premiums. The loss in NonOperating Revenue Other is related to the loss on the sale, transfer, or disposal of equipment.
Annual Financial Report FY 2003 (Version 1.0) 3

Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

June 30, 2003

Operating Revenue Tuition and Fees G rants and C ontracts Sales and S ervices of Educational D epartm A ux ilia r y O the r

$0.00 7,490,761.14
148,753.31
231,517,589.63

Total Operating Revenue

239,157,104.08

Nonoperating Revenue State A ppropriations G ifts Investment Income G rants and C ontracts O the r

152,463,172.00
287,431.81 1,013,910.34
(473,826.02)

Total Nonoperating Revenue

153,290,688.13

C apital G ifts and Grants State C apital Appropriations Other C apital G ifts and Grants

Total C apital Gifts and G rants

0.00

Total Revenues

$392,447,792.21

June 30, 2002
$0.00 5,799,499.25
70,638.91 212,080,595.10 217,950,733.26
159,148,724.00 1,549,041.39 3,724,221.10 142,305.89
164,564,292.38
0.00 $382,515,025.64

Annual Financial Report FY 2003 (Version 1.0) 4

Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003
$1,383,822.06 87,983.55
99,798,308.44 12,885,574.79
245,642.00 283,470,104.85
3,339,850.87 599,209.00
4,139,106.08
405,949,601.64
$405,949,601.64

June 30, 2002
$194,918.73 12,782.94
101,308,682.17 14,820,106.30 592,328.55
236,819,769.36 4,770,034.45 903,055.01
359,421,677.51
361,059.68
$359,782,737.19

The compensation and employee benefits category increased by approximately $3,685,611.33. The increase reflects a pay raise for the employees of the institution of approximately three percent with the associated fringe benefits. The increase also reflects an increased cost of health insurance for the employees of the University System Office. In addition the increased cost of health insurance for the University System is the primary cause of the increase in Institutional Support expense as this is where health claims paid for all the institutions is reported.
During FY 2003 the University System Office reimbursed the Georgia Emergency Management Agency $4,429,371.70 for the Federal and State flood recovery funds received for repairs and restorations made to Albany State University's campus resulting from flood damage caused by tropical storm Alberto. The funds for this reimbursement came from Albany State University, ($878,000), the University System Office FY 2003 State Appropriations, ($1,089,520), and the remainder from the University System Office Property Reserves.
Statement of Cash Flows
The final statement presented by the University System Office is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The
Annual Financial Report FY 2003 (Version 1.0) 5

fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Statement of Cash Flows, Condensed
Cash Provided (used) By: Operating Activities Non-capital Financing Activities Investing Activities Capital and Related Financing Activities

June 30, 2003
($167,827,812.33) 153,364,452.08 85,807.72 (2,696,219.95)

Net Change in Cash Cash, Beginning of Year
Cash, End of Year
Capital Assets

(17,073,772.48) 89,527,249.82
$72,453,477.34

The University System Office had one significant capital asset addition for buildings in FY 2003. A residence, to be used as a home for the Chancellor of the University System of Georgia, was purchased in partnership with Georgia State University.

The total purchase price was $1,928,406.53 of which $1,200,000 is reported as Buildings, Capital Assets on the books of Georgia State University and $728,406.53 is reported as Buildings, Capital Assets on the books of the University System Office.

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements

Health Insurance

The University System Office is also the fiscal agent for health insurance for all the institutions in the System. The financial information for all related health insurance transactions is included on the face of the statements in this Annual Financial Report, including the liability for claims Incurred But Not Reported. The summary information regarding revenues, expenditures and the related liability for fiscal year 2003 is listed below. (Investments are shown at Market Value).

Beginning Net Assets July 1, 2002

$ 45,989,353

Plus Revenues FY 2003 Less Expenditures FY 2003
Ending Net Assets June 30, 2003

217,170,942 207,569,843
$ 55,590,452

Cash in Bank Investments

$27,458,634 $28,131,818

Less Incurred But Not Reported Claims

(19,665,000)

Annual Financial Report FY 2003 (Version 1.0) 6

Economic Outlook The University System Office is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University System Office's overall financial position is strong. The reduction in Net Assets for FY 2003 is a direct reflection of the related reduction in State Appropriations. Due to these reductions no new programs were added during the year and planned expansions of some programs were cancelled or postponed. Budget reductions initiated in FY 2003 will continue into FY 2004 with additional cuts projected. Constant monitoring of resources and mission critical needs will continue through the year in order to maintain the office's ability to react and respond to unknown internal and external factors. _______________________ William R. Bowes, Vice Chancellor for Fiscal Affairs/Treasurer The Board of Regents University System Office
Annual Financial Report FY 2003 (Version 1.0) 7

Statement of Net Assets

U NIV E RS ITY S Y S TE M O F F IC E STATE M ENT O F NE T ASSETS June 30, 2003
ASSETS Curre nt A sse ts C a s h a n d C a s h E q u iv a le n ts S h o rt-te rm In v e s tm e n ts A c c o u n ts R e c e iv a b le , n e t In v e n to rie s O th e r A s s e ts T o ta l C u rre n t A s s e ts

June 30, 2003
$ 7 2 ,4 5 3 ,4 7 7 .3 4 1 ,9 8 7 ,5 0 8 .8 6 5 ,4 3 3 .7 5
7 4 ,4 4 6 ,4 1 9 .9 5

No nc urre nt A sse ts Noncurrent C ash In v e s tm e n ts N o te s R e c e iv a b le , n e t C a p ita l A s s e ts , n e t T o ta l N o n c u rre n t A s s e ts TOTAL ASSETS

7 ,8 5 3 ,7 4 9 .2 8
1 4 ,8 6 7 ,6 7 3 .9 2 2 2 ,7 2 1 ,4 2 3 .2 0 9 7 ,1 6 7 ,8 4 3 .1 5

LIA BILIT IES Curre nt Lia b ilitie s
A c c o u n ts P a y a b le a n d A c c ru e d Lia b ilitie s D e p o s its D e fe rred R e v e nue O th e r Lia b ilitie s D e p o s its H e ld fo r O th e r O rg a n iz a tio n s C o m p e n s a te d A b s e n c e s (c u rre n t p o rtio n )
T o ta l C u rre n t Lia b ilitie s No nc urre nt Lia b ilitie s
C o m p e n s a te d A b s e n c e s Lo n g -te rm Lia b ilitie s
T o ta l N o n c u rre n t Lia b ilitie s T OT A L LIA BILIT IES

4 3 9 ,4 6 6 .6 0
2 0 ,5 3 4 ,8 7 8 .8 0 3 5 8 ,1 7 4 .4 7
1 ,3 8 6 ,5 7 3 .7 8 2 2 ,7 1 9 ,0 9 3 .6 5
8 3 0 ,0 5 2 .1 3 1 ,8 4 0 ,5 2 4 .9 0 2 ,6 7 0 ,5 7 7 .0 3 2 5 ,3 8 9 ,6 7 0 .6 8

NET ASSETS In v e s te d in C a p ita l A s s e ts , n e t o f re la te d d e b t R e s tric te d fo r N o n e x p e n d a b le E x p e n d a b le C a p ita l P ro je c ts U n re s tric te d TOTAL NET ASSETS

1 2 ,1 5 7 ,2 7 0 .2 2
1 0 ,4 0 1 ,4 2 2 .8 4 1 ,1 2 3 ,4 0 9 .1 0
4 8 ,0 9 6 ,0 7 0 .3 1 $ 7 1 ,7 7 8 ,1 7 2 .4 7

Annual Financial Report FY 2003 (Version 1.0) 8

Statement of Revenues, Expenses and Changes in Net Assets

UNIVERSITY SYSTEM OFFICE

STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS

for the Year Ended June 30, 2003

June 30, 2003

REVENUES

Operating Revenues

Student Tuition and Fees

$0.00

Less: Sponsored and Unsponsored Scholarships

Federal Appropriations

Federal Grants and C ontracts

6,235,548.88

State and Local Grants and C ontracts

987,381.00

Nongovernmental Grants and C ontracts

267,831.26

Sales and Services of Educational Departments

148,753.31

Auxiliary Enterprises

Other Operating Revenues

231,517,589.63

Total Operating Revenues

239,157,104.08

EXPENSES

Operating Expenses

Salaries:

Faculty

Staff

20,056,220.52

Benefits Other Personal Services

5,014,072.19

Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation

730,055.25 997,290.25 26,185,684.00 347,746,123.70 5,220,155.73

Total Operating Expenses Operating Income (loss) NONOPERATING REVENUES (EXPENSES) State Appropriations Gifts Investment Income (endowments, auxiliary and other) Interest Expense (capital assets)

405,949,601.64 (166,792,497.56) 152,463,172.00
287,431.81

Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss
State C apital Appropriations C apital Grants and Gifts Federal Grants & C ontracts State Grants & C ontracts Other Grants and C ontracts
Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported C umulative effect of changes in accounting principle Prior Year Adjustments Net Assets-beginning of year, restated

(473,826.02) 152,276,777.79 (14,515,719.77)
8,000.00 39,853.27 966,057.07 1,013,910.34 (13,501,809.43)
80,675,219.08
4,604,762.82 85,279,981.90

Net Assets-End of Year

$71,778,172.47

Annual Financial Report FY 2003 (Version 1.0) 9

Statement of Cash Flows
UNIVERSITY SYSTEM OF FICE STATEMENT OF CASH F LOWS For the Year Ended June 30, 2003
CASH F LOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities
CASH F LOWS FROM NON-CAPITAL F INANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities
CASH F LOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES C apital Grants and Gifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital Debt and Leases Interest Paid on C apital Debt and Leases Net C ash used by C apital and Related Financing Activities
CASH F LOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003 $0.00
6,925,613.96 148,753.31
(386,652,028.86) (19,912,015.83) (997,290.25)
232,659,155.34 (167,827,812.33) 152,071,113.15
279,428.59 1,013,910.34 153,364,452.08
1,011,099.00 (2,366,992.82) (1,218,537.98)
(121,788.15) (2,696,219.95)
85,807.72 85,807.72 (17,073,772.48) 89,527,249.82 $72,453,477.34

Annual Financial Report FY 2003 (Version 1.0) 10

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating Activities
D e pr e c ia tio n C hange in Assets and Liabilities:
Receivables, net Inventories Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($166,792,497.56)
5,220,155.73
138,787.74
259,034.95 (1,469,794.84)
(3,420.00) (5,511,675.57)
331,597.22
($167,827,812.33)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current Assets

$72,453,477.34 $72,453,477.34

The University System Office had no transactions to report under Non-Cash Investing, NonCapital Financing, and Capital and Related-Financing Transactions.

Annual Financial Report FY 2003 (Version 1.0) 11

UNIVERSITY SYSTEM OFFICE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations The University System Office of Georgia's Board of Regents was created in 1931 as a part of a reorganization of Georgia's state government. With this act, public higher education in Georgia was unified for the first time under a single governing and management authority. The governor appoints members to the Board, who each serve seven years. Today the Board of Regents is composed of 18 members, five of whom are appointed from the state-at-large, and one from each of the 13 congressional districts. The Board elects a chancellor who serves as its chief executive officer and the chief administrative officer of the University System. The Board oversees 34 institutions: four research institutions, 2 regional universities, 13 state universities, 2 state colleges, and 13 two-year colleges. In addition, one marine research facility is governed by the Board. These institutions enroll more than 200,000 students and employ more than 9,000 faculty and 30,000 employees to provide teaching and related services to students and the communities in which they are located.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. The University System Office does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, the University System Office is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University System Office is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University System Office's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Annual Financial Report FY 2003 (Version 1.0) 12

Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
Basis of Accounting For financial reporting purposes, the University System Office is considered a special-purpose government engaged only in business-type activities. Accordingly, the University System Office's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-system office transactions have been eliminated.
The University System Office has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University System Office has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The University System Office accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments.
Accounts Receivable Accounts receivable consists of allotments due from the Office of the Treasury and Fiscal Services, amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University System Office's grant and contracts, and registrations and licensing fees for the services of the Office of Informational and Instructional Technology. Accounts receivable are recorded net of estimated uncollectible amounts.
Annual Financial Report FY 2003 (Version 1.0) 13

Inventories The University System Office had no inventories as of June 30, 2003.
Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University System Office's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to the University System Office when complete. For the year ended June 30, 2003, GSFIC did not transfer any assets to the University System Office.
Deferred Revenues Deferred revenues include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. The University System Office reported accrued liability for compensated absences in the amount of $1,885,028.69 as of 6-30-2002. For FY 2003, this
Annual Financial Report FY 2003 (Version 1.0) 14

amount was adjusted for FICA and a 360-hour maximum for an addition of $144,204.69. Also in FY2003, $1,706,802.61 was earned in compensated absences and employee payments/adjustments were $1,519,410.08, for a total net increase of $331,597.22. The ending balance as of 6-30-2003 in accrued liability for compensated absences is $2,216,625.91.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The University System Office's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the University System Office's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University System Office may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the University System Office is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the University System Office is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University System Office, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff.
Annual Financial Report FY 2003 (Version 1.0) 15

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted Total Unrestricted Net Assets

June 30, 2003
$0.00 (5,892,838.30)
53,988,908.61 $48,096,070.31

When an expense is incurred that can be paid using either restricted or unrestricted resources, the University System Office's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes The University System Office, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues The University System Office has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
Sponsored and Unsponsored Scholarships The University System Office had no Sponsored and Unsponsored Scholarships as of June 30, 2003.

Annual Financial Report FY 2003 (Version 1.0) 16

Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus the University System Office) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus the University System Office), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Annual Financial Report FY 2003 (Version 1.0) 17

Categorization of Deposits
The University System Office's cash deposits are categorized by risk as follows:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the University System Office or by its agent in the University System Office's name.
Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University System Office's name.
Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the University System Office's name, and amounts uncollateralized.
Cash Deposits as of June 30, 2003

Cash Deposits Investment Portfolio Accounts
Total Cash Deposits

C arrying Amount
$40,762,194.45 27,675,074.95

Bank Balances
$32,187,299.01 27,675,074.95

Risk Categories

1

2

3

$0.00 $0.00 $32,187,299.01 27,675,074.95

$68,437,269.40 $59,862,373.96 $27,675,074.95 $0.00 $32,187,299.01

Categorization of Investments
The University System Office's investments are categorized as to credit risk within the three categories described below:
Category 1 - Insured or registered, or securities held by the University System Office or its agent in the University System Office's name
Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University System Office's name.
Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University System Office's name.

Annual Financial Report FY 2003 (Version 1.0) 18

At June 30, 2003, the University System Office's investments consisted of the following:

Type of Investments
C ommon Stock C orporate Bonds Securities and C orporate O b lig a tio ns

Risk C ategories

1

2

$0.00

$0.00

3 $0.00

C arrying Amount
$0.00 0.00 0.00

Totals

$0.00

$0.00

$0.00

$0.00

Investments Not Subject to C ategorizations: Board of Regents
Short-Term Fund Legal Fund - Porter Total Return Fund - Brownell Investment Portfolio Accounts Mutual Funds Real Estate State Investment Pool Short-Term Investments
Total Investments

4,016,207.94 1,763,659.87 6,090,089.41
$11,869,957.22

Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University System Office did not own any specific, identifiable investment securities of the pool.

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2003.

June 30, 2003

S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctivities Fede ral, S tate, and Private Funds O th e r
Less A llowance for D oubtful A ccounts

$0.00
1,768,627.22 218,881.64
1,987,508.86

Net A ccounts Receiv able

$1,987,508.86

Annual Financial Report FY 2003 (Version 1.0) 19

Note 4. Inventories The University System Office had no inventories as of 6-30-03. Note 5. Notes/Loans Receivable The University System Office had no Notes/Loans Receivable as of June 30, 2003.
Annual Financial Report FY 2003 (Version 1.0) 20

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2003.

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$2,501,877.00
2,501,877.00

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

29,300,358.17 1,238,605.00
10,000.00 30,548,963.17

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

19,097,501.81 309,651.26
19,407,153.07

Total Capital Assets, Being Depreciated, Net 11,141,810.10

Capital Assets, net

$13,643,687.10

Additions $0.00 0.00

Reductions $90,000.00 90,000.00

Ending Balance 6/30/2003
$2,411,877.00 0.00
2,411,877.00

728,406.53 1,655,460.64 3,297,070.00
5,680,937.17

4,368,596.23 1,238,605.00
5,607,201.23

0.00 728,406.53
0.00 26,587,222.58
3,297,070.00 0.00
10,000.00 30,622,699.11

4,699,955.73 590,826.03
5,290,781.76 390,155.41
$390,155.41

6,221,381.38 309,651.26
6,531,032.64

0.00 0.00 0.00 17,576,076.16 590,826.03 0.00 0.00 18,166,902.19

(923,831.41) 12,455,796.92

($833,831.41) $14,867,673.92

Annual Financial Report FY 2003 (Version 1.0) 21

Note 7. Deferred Revenue The University System Office had no Deferred Revenue as of June 30, 2003. Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2003 was as follows:

Leases Lease Obligations

Beginning Balance
July 1, 2002

Additions

Reductions

Ending Balance June 30, 2003

$0.00 $3,297,070.00 $586,666.30 $2,710,403.70

Current Portion
$869,878.80

Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total

1,885,028.69 1,885,028.69

1,851,007.30 1,851,007.30

1,519,410.08 1,519,410.08

2,216,625.91 0.00
2,216,625.91

1,386,573.78 1,386,573.78

Total Long Term Obligations

$1,885,028.69 $5,148,077.30 $2,106,076.38 $4,927,029.61 $2,256,452.58

(a) The beginning balance includes the amount shown as current in FY2002 and reclassified as long-term in FY2003.

Note 9. Lease Obligations
The University System Office is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property.
Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2003, were as follows:

Year Ending June 30:

Year

2004

1

2005

2

2006

3

2007

4

Total m inim um lease paym ents

Less: Interest Less: Executory costs (if paid) Principal Outstanding

Real Property

C apital Leases

Operating Leases

$955,449.41 955,449.41 834,048.18 124,555.52
2,869,502.52 159,098.82 0.00
$2,710,403.70

$328,331.76 281,771.48 281,771.48 234,809.73
$1,126,684.45

Annual Financial Report FY 2003 (Version 1.0) 22

CAPITAL LEASES
Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2004 and 2007. Expenditures for fiscal year 2003 were $744,178.83 of which $89,740.63 represented interest. Total principal paid on capital leases was $654,438.20 for the fiscal year ended June 30, 2003. Interest rates range from 3.66 percent to 3.71 percent.
Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms.
The University System Office entered into two new Capital Lease Obligations in FY 2003. In July a lease purchase was completed for the purchase of numerous items of equipment. This is Obligation Number 489 with Bank of America. Total principal amount is $590,441.80 with $522,670.00 for capitalizable equipment. The interest rate is 3.66 percent with payment terms through FY 2006. In September another lease purchase was completed for the right to use of Campus Pipeline software. This is Obligation Number 471 with Bank of America. Total principal amount is $2,774,400.00, all of which is to be capitalized. The interest rate is 3.71 percent with payment terms through FY 2007.
OPERATING LEASES
The University System Office entered into a new Operating Lease in FY 2003. In May an operating lease was completed for software and licensing of Oracle software. This is Obligation Number 182 with SunTrust Bank. Total principal amount is $1,042,628.28 with an interest rate of 3.87 percent and payment terms through FY 2007.
Also reported in the payment schedule for Operating Leases is Obligation Number 166 with SunTrust Bank. This obligation, which originated in FY 2001, will be paid in full in December 2003. The remaining balance as of June 30, 2003 is $46,560.28, principal and interest.
The University System Office has also entered into an agreement to lease real property, which is classified as an operating lease (leases on assets not recorded on the balance sheet). This lease is for the office location for the Office of Informational and Instructional Technology and contains provisions that, at the expiration date of the original term of the lease, the University System Office has the option of renewing the lease on a year-to-year basis. Future minimum lease payments for the operating lease as of June 30, 2003 are $436,740.00. Amounts are included only for the cancelable lease for which an option to renew for the subsequent fiscal year has been exercised.
Annual Financial Report FY 2003 (Version 1.0) 23

Note 10. Retirement Plans

Teachers Retirement System Of Georgia

Plan Description The University System Office participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of the University System Office who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The University System Office makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$1,527,821.36 $1,303,575.67 $1,388,030.80

Regents Retirement Plan

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 47-21-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.

Funding Policy The University System Office makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation.

Annual Financial Report FY 2003 (Version 1.0) 24

Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.
The University System Office and the covered employees made the required contributions of $247,184.31 (10.02%) and $123,345.95 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description The University System Office participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $19,566.59, which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
The University System Office is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. The University System Office and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per person and dental coverage up
Annual Financial Report FY 2003 (Version 1.0) 25

to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Board of Regents has contracted with Blue Cross Blue Shield to process all medical and dental claims in accordance with medical coverage guidelines as established by the Board of Regents. All claims submitted by program participants are remitted directly to Blue Cross Blue Shield from the various organizational units for verification of coverage, processing, and payment through a bank account maintained for this purpose by Blue Cross Blue Shield. Blue Cross Blue Shield maintains an eligibility file based on information furnished by the various organizational units of the University System of Georgia.
Express Scripts is the administrator of the Board of Regents' prescription drug plan. Pharmacy drug claims will be processed in accordance with guidelines established for the Board of Regents' Prescription Drug Benefit Program. Generally, claims are submitted by participating pharmacies directly to Express Scripts for verification, processing and payment. Express Scripts maintains an eligibility file based on information furnished by Blue Cross Blue Shield on behalf of the various organizational units of the University System of Georgia.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. The University System Office, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the
Annual Financial Report FY 2003 (Version 1.0) 26

grantor cannot be determined at this time although the University System Office expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against the University System Office (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 61 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, the University System Office recognized as incurred $198,862.13 of expenditures, which was net of $93,129.88 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 27

Note 14. Natural Classifications With Functional Classifications

The University System Office's operating expenses by functional classification for FY2003 are shown below:
S t a t e me nt o f O pe ra t ing Expe ns e s - Na t ura l v s F unc t io na l C la ss ific a t io ns F o r t he F is c a l Y e a r Ende d June 30, 2003
F unc t iona l Cla s s ific a t io n FY 2003

Na tura l C la ssifica tio n

Instruction R e se a rch

P u b lic S erv ice

A cadem ic Support

S tude nt S erv ices

F ac ulty Staff B enefits P erso nal Serv ic es T ravel Sc ho lars hips and F ello ws hips Ut ilit ie s Supplies and Others Serv ic es D eprec iatio n

$ 0.00 3 7 8 ,0 6 9 .5 1 7 0 ,6 2 8 .4 3
4 5 ,2 9 6 .5 6
4 ,5 9 0 .8 7 1,15 1,115 .4 9 ( 2 6 5 ,8 7 8 .8 0 )

$ 0.00 5 5 ,8 5 4 .18
5 ,4 9 7 .10 2 ,0 3 5 .0 3
2 4 ,5 9 7 .2 4

$ 0.00 1,4 8 3 ,8 3 9 .6 0
3 5 4 ,7 5 7 .11
5 5 ,9 9 0 .9 5
2 0 ,6 7 8 ,6 3 5 .2 4 7 7 ,2 0 8 ,3 10 .4 6
16 ,7 7 5 .0 8

$ 0.00 1,14 3 ,6 4 8 .0 1
2 5 1,0 4 1.9 4
7 6 ,0 0 1.17
4 9 ,7 11.7 7 11,0 8 4 ,2 5 4 .9 7
2 8 0 ,9 16 .9 3

$ 0.00 18 7 ,2 6 0 .2 0 3 2 ,8 6 3 .5 5
14 ,3 0 6 .14
4 ,5 2 9 .9 0 6 ,6 8 2 .2 1

T o tal Expens es

$ 1,383,822.06

$ 87,983.55

$ 99,798,308.44

$ 12,885,574.79

St at ement of Operat ing Expenses - Nat ural vs Func t ional Classific at ions For t he Fisc al Y ear Ended June 30, 2003

Natural C lassification

Institutio nal Suppo rt

Func t ional Classific at ion FY 2003

P lant

Operatio ns

Sc ho larships A uxiliary

Unallo c ated

& M aintenance

& F ello wships Enterpris es

Expens es

$ 245,642.00
To tal Expens es

F ac ult y Staff B enefits P erso nal Services T rav el Scho larships and F ello wships Ut ilit ie s Supplies and Others Services Depreciatio n

$ 0.00 16,807,549.02 4,299,284.06
536,425.40 398,081.25 5,448,216.22 254,931,312.46 1,049,236.44

$ 0.00 3,339,850.87

$ 0.00

$ 0.00

599,209.00

$ 0.00 4,139,106.08

$ 0.00 20,056,220.52
5,014,072.19 0.00
730,055.25 997,290.25 26,185,684.00 347,746,123.70 5,220,155.73

T o tal Expens es

$ 283,470,104.85

$ 3,339,850.87

$ 599,209.00

$ 0.00

$ 4,139,106.08

$ 405,949,601.64

Annual Financial Report FY 2003 (Version 1.0) 28

VALDOSTA STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2003

Valdosta State University Valdosta, Georgia

Dr. Ronald M. Zaccari
President

Mr. James L. Black
Interim Vice President for Business and Finance

VALDOSTA STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2003
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 9 Statement of Revenues, Expenses and Changes in Net Assets.......................................... 10 Statement of Cash Flows ................................................................................................... 11 Note 1 Summary of Significant Accounting Policies ...................................................... 13 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 18 Note 3 Accounts Receivable............................................................................................. 20 Note 4 Inventories............................................................................................................. 21 Note 5 Notes/Loans Receivable........................................................................................ 21 Note 6 Capital Assets........................................................................................................ 22 Note 7 Deferred Revenue.................................................................................................. 23 Note 8 Long-Term Liabilities ........................................................................................... 23 Note 9 Lease Obligations.................................................................................................. 23 Note 10 Retirement Plans ................................................................................................. 25 Note 11 Risk Management................................................................................................ 27 Note 12 Contingencies...................................................................................................... 27 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 28 Note 14 Natural Classifications With Functional Classifications..................................... 29

VALDOSTA STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Valdosta State University is one of the 34 institutions of the University System of Georgia. The University, located in Valdosta, Georgia, was founded in 1906 and is one of only two regional universities within the University system. The University offers nationally accredited programs in Art, Business, Music, Nursing, Sports Medicine, Speech and Language Pathology, School Psychology and Teacher Education. Valdosta State University offers baccalaureate and masters degrees in a wide variety of subjects. This wide range of educational opportunities attracts a highly qualified faculty and a student body of approximately 10,000 students each year. The institution suffered enrollment losses after implementing the System Initiative to move Remedial Instruction to the System's 2-year colleges. However, the University feels that this trend has reversed as shown by the comparison numbers that follow.

Faculty

Students (Fall Headcount)

FY2003 FY2002 FY2001 FY2000

417

9,915

427

9,238

412

8,820

397

8,755

Overview of the Financial Statements and Financial Analysis

Valdosta State University is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2002 and FY 2003.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Valdosta State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements.

Annual Financial Report FY 2003 (Version 1.0) 1

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

Assets: C urrent Assets C apital Assets, net Other Assets Total Assets

June 30, 2003
$11,712,145.58 84,254,921.18 5,898,523.24
101,865,590.00

June 30, 2002
$9,887,182.09 81,430,968.57
6,324,546.07 97,642,696.73

Liabilities: C urrent Liabilities Noncurrent Liabilities Total Liabilities

5,043,229.14 1,767,678.56 6,810,907.70

5,273,421.89 766,095.30
6,039,517.19

Net Assets: Invested in C apital Assets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects Unrestricted Total Net Assets

83,496,014.83 2,716,732.86 4,904,047.96
3,937,886.65 $95,054,682.30

80,462,441.59 2,734,942.54 3,666,525.81
4,739,269.60 $91,603,179.54

The total assets of the institution increased by $4,222,893.27. However, a review of the Statement of Net Assets will reveal that this increase was primarily due to an increase of $2,823,952.61 of investment in plant, net of accumulated depreciation. See Note 1 in the notes to the financial statements for additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets. Accounts receivable also show an increase. For FY2002, Student Financial Aid was not shown as a receivable, but rather as a debit balance in Liabilities (Deposits held for other organizations). In FY2003, Student Financial Aid comprises $1,666,730.42 of the receivable balance ($1,127,313 was Hope for Summer Term 2003, which the state does not make available until July 1, 2003 or thereafter.)
Annual Financial Report FY 2003 (Version 1.0) 2

The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution. The total liabilities for the year increased by $771,390.51. The primary cause for the overall increase in liabilities was the aforementioned change in presentation for Student Financial Aid Receivable. The combination of the increase in total assets of $4,222,893.27 and the increase in total liabilities of $771,390.51 yields an increase in total net assets of $3,451,502.76. The increase in total net assets is primarily in the category of invested in capital assets- net of debt in the amount of $3,033,573.24 although other categories of Net Assets did increase during the year.
Annual Financial Report FY 2003 (Version 1.0) 3

Statement of Revenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30, 2003

Operating Revenues Operating Expenses Operating Loss

$49,781,824.70 99,603,767.53 (49,821,942.83)

Nonoperating Revenues and Expenses

46,573,469.58

Income (Loss) Before other revenues, expenses, gains or losses

(3,248,473.25)

Other revenues, expenses, gains or losses

3,508,770.52

Increase in Net Assets

260,297.27

Net Assets at beginning of year, as originally reported Cumulative effect of changes in accounting principle Prior Year Adjustments Net Assets at beginning of year, restated

91,603,179.54
3,191,205.49 94,794,385.03

Net Assets at End of Year

$95,054,682.30

June 30, 2002 $46,248,669.29
94,110,274.76 (47,861,605.47) 50,190,070.22
2,328,464.75 9,138,243.62 11,466,708.37 157,433,237.18 77,296,766.01 80,136,471.17 $91,603,179.54

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:

Annual Financial Report FY 2003 (Version 1.0) 4

Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

June 30, 2003

Operating Revenue Tuition and Fees G rants and C ontracts Sales and S ervices of Educational D epartm A ux ilia r y O the r

$19,173,706.64 10,601,080.91 218,843.37 18,899,731.64 888,462.14

Total Operating Revenue

49,781,824.70

Nonoperating Revenue State A ppropriations G ifts Investment Income G rants and C ontracts O the r

47,328,114.81 50,851.88
387,251.79 705,798.77 (795,444.41)

Total Nonoperating Revenue

47,676,572.84

C apital G ifts and Grants State C apital Appropriations Other C apital G ifts and G rants

2,770,341.75 32,630.00

Total C apital Gifts and G rants

2,802,971.75

Total Revenues

$100,261,369.29

June 30, 2002
$17,337,483.46 9,628,282.64 152,065.24
18,248,440.11 882,397.84
46,248,669.29
49,349,784.00 19,087.23 (22,441.75)
794,043.17 437,156.65
50,577,629.30
8,344,200.45
8,344,200.45 $105,170,499.04

Annual Financial Report FY 2003 (Version 1.0) 5

Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003
$41,062,530.86
1,113,229.95 7,184,899.93 5,480,767.52 12,884,991.02 9,593,886.06 3,505,326.35 18,778,135.84
99,603,767.53
397,304.49
$100,001,072.02

June 30, 2002
$38,703,067.79
1,140,556.72 7,481,784.05 5,712,960.03 12,546,827.01 7,969,183.57 3,237,889.32 17,318,006.27
94,110,274.76
(406,484.09)
$93,703,790.67

Rising enrollment as well as modest tuition increases account for the majority of the increase in operating revenues. Grants and Contracts also grew during the year.
State appropriations decreased by approximately ($2,021,669.19) as a result of statewide budget reductions. As mentioned in FY2002, Valdosta State University implemented a Strategic Plan and continues to plan and act in ways that minimize the impact of reductions on the University's academic mission and student services.
The compensation and employee benefits category increased by approximately $4,477,716.03. The increase reflects a pay raise for the employees of the institution of approximately three percent with the associated fringe benefits. The increase also reflects an increased cost of health insurance for the employees of the institution.
Utilities increased by approximately $46,498.22 during the past year. The University changed from RTP (Real Time Pricing) to SLM rates (School Load Management). This pricing change allowed the University to consolidate peripheral property utility billings with that of main campus utility billings. If the University had not made this change, it is expected that utility costs would have been greater. FY2003 was the first full fiscal year under the new pricing structure.
Functional expenditures for the Operation and Maintenance of Plant appear to have increased by $1,624,702.49. However, the Statement of Functional Expenditures for 2003 includes a depreciation adjustment for all prior years equal to 10% of the residual value of capital assets.

Annual Financial Report FY 2003 (Version 1.0) 6

For Plant Operations, the prior year adjustment was $2,469,450.91. Therefore, expenditures for the Operation and Maintenance of Plant actually decreased $844,748.42 during 2003.

Statement of Cash Flows

The final statement presented by the Valdosta State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Year Ended June 30, 2003, Condensed

Cash Provided (used) By: Operating Activities Non-capital Financing Activities Investing Activities Capital and Related Financing Activities
Net Change in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2003
($47,173,965.67) 49,082,300.71 597,455.92 (3,139,975.55)
(634,184.59) 2,777,410.87
$2,143,226.28

Capital Assets
The University had one significant capital asset addition for facilities in fiscal year 2003. Phase II of the University Center renovation was completed and opened in November 2002. The $2,644,388.25 for this project was funded by the Georgia State Finance and Investment Commission (GSFIC).
Valdosta State University also completed major renovations to the University Union Snack Bar (Loop Restaurant) in FY2003. This renovation was completely funded from Auxiliary Reserves.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Annual Financial Report FY 2003 (Version 1.0) 7

Economic Outlook The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong despite reductions in State funding. Valdosta State University expects a 2.5% reduction in state funds in Fiscal year 2004 as well as an additional 5% reduction in Fiscal year 2005. Management continues to plan for these reductions with a focus on fulfilling the University's academic mission and meeting student needs. The University will continue to monitor resources closely in order to maintain the University's ability to react to internal and external issues. _________________________ Dr. Ronald M. Zaccari, President Valdosta State University
Annual Financial Report FY 2003 (Version 1.0) 8

Statement of Net Assets

V A LD O S TA S TA TE U NIV E RS ITY STA TEM ENT O F NET A SSE TS June 30, 2003
ASSETS Curre nt A sse ts C a sh a nd C a sh Eq uiv a le nts S ho rt-te rm Inv e stm e nts A cco unts R e ce iv a b le , ne t In v e n to rie s O th e r A ss e ts T o ta l C u rre n t A s se ts

June 30, 2003
$ 2 ,1 1 8 ,2 0 0 .5 3 5 ,2 4 6 ,4 2 3 .0 5 3 ,1 7 3 ,6 7 4 .5 4 1 ,0 7 1 ,4 8 1 .5 8 1 0 2 ,3 6 5 .8 8
1 1 ,7 1 2 ,1 4 5 .5 8

Noncurre nt A sse ts Noncurrent C ash In v e s tm e n ts No te s R e c e iv a b le , ne t C a p ita l A sse ts, ne t T o ta l No ncurre nt A sse ts TOTAL ASSETS

2 5 ,0 2 5 .7 5 5 ,7 0 1 ,8 0 5 .3 5
1 7 1 ,6 9 2 .1 4 8 4 ,2 5 4 ,9 2 1 .1 8 9 0 ,1 5 3 ,4 4 4 .4 2 1 0 1 ,8 6 5 ,5 9 0 .0 0

LIA BILIT IE S Curre nt Lia bilitie s
A cco unts P a y a b le a nd A ccrue d Lia b ilitie s D e p o sits D e fe rre d R ev enue O the r Lia b ilitie s D e p o sits H e ld fo r O th e r O rg a niz a tio ns C o m p e n sa te d A b s e n c e s (c u rre n t p o rtio n )
T o ta l C urre nt Lia b ilitie s No ncurre nt Lia b ilitie s
C o m p e n sa te d A b s e n c e s Lo ng -te rm Lia b ilitie s
T o ta l No ncurre nt Lia b ilitie s TOTA L LIA BILITIES

2 ,1 1 6 ,6 6 8 .8 1 2 0 0 .0 0
9 2 9 ,6 7 5 .1 5 2 1 5 ,7 8 7 .0 4 3 8 4 ,6 6 5 .2 5 1 ,3 9 6 ,2 3 2 .8 9 5 ,0 4 3 ,2 2 9 .1 4
1 ,1 5 7 ,1 4 9 .2 6 6 1 0 ,5 2 9 .3 0
1 ,7 6 7 ,6 7 8 .5 6 6 ,8 1 0 ,9 0 7 .7 0

NET ASSETS In v e s te d in C a p ita l A s se ts , ne t o f re la te d d e b t R e stricte d fo r No ne x pe nd a ble Ex p e nd a b le C a p ita l P ro je c ts U n re s tricte d TOTAL NET ASSETS

8 3 ,4 9 6 ,0 1 4 .8 3
2 ,7 1 6 ,7 3 2 .8 6 4 ,9 0 4 ,0 4 7 .9 6
3 ,9 3 7 ,8 8 6 .6 5 $ 9 5 ,0 5 4 ,6 8 2 .3 0

Annual Financial Report FY 2003 (Version 1.0) 9

Statement of Revenues, Expenses and Changes in Net Assets

VALDOSTA STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2003
June 30, 2003

REVENUES

Operating Revenues

Student Tuition and Fees

$23,156,244.54

Less: Sponsored and Unsponsored Scholarships

(3,982,537.90)

Federal Appropriations

Federal Grants and C ontracts

9,178,034.03

State and Local Grants and C ontracts

1,036,667.02

Nongovernmental Grants and C ontracts Sales and Services of Educational Departments

386,379.86 218,843.37

Auxiliary Enterprises

18,899,731.64

Other Operating Revenues

888,462.14

Total Operating Revenues

49,781,824.70

EXPENSES

Operating Expenses

Salaries:

Faculty Staff

28,045,075.89 24,365,060.18

Benefits Other Personal Services

14,830,726.81 349,171.79

Travel

1,015,724.40

Scholarships and Fellowships

4,401,536.11

Utilities

3,321,083.69

Supplies and Other Services Depreciation

18,469,660.60 4,805,728.06

Total Operating Expenses

99,603,767.53

Operating Income (loss) NONOPERATING REVENUES (EXPENSES)

(49,821,942.83)

State Appropriations

47,328,114.81

Gifts

50,851.88

Investment Income (endowments, auxiliary and other) Interest Expense (capital assets)

387,251.79 (397,304.49)

Other Nonoperating Revenues

(795,444.41)

Net Nonoperating Revenues

46,573,469.58

Income before other revenues, expenses, gains, or loss

(3,248,473.25)

State C apital Appropriations C apital Grants and Gifts Federal Grants & C ontracts

2,770,341.75 32,630.00
211,859.24

State Grants & C ontracts

476,310.77

Other Grants and C ontracts

17,628.76

Total Other Revenues

3,508,770.52

Increase in Net Assets NET ASSETS

260,297.27

Net Assets-beginning of year, as originally reported

91,603,179.54

C umulative effect of changes in accounting principle

Prior Year Adjustments

3,191,205.49

Net Assets-beginning of year, restated

94,794,385.03

Net Assets-End of Year

$95,054,682.30

Annual Financial Report FY 2003 (Version 1.0) 10

Statement of Cash Flows
VALDOSTA STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2003
CASH F LOWS F ROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k ing /T r a ns p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities
CASH F LOWS F ROM NON-CAPITAL F INANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities
CASH F LOWS F ROM CAPITAL AND RELATED F INANCING ACTIVITIES C apital Grants and Gifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital Debt and Leases Interest Paid on C apital Debt and Leases Net C ash used by C apital and Related Financing Activities
CASH F LOWS F ROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003
$22,967,996.26
10,600,773.07 218,843.37
(38,703,548.99) (52,320,728.34)
(8,384,074.01) (277,754.86) 307,770.22
4,126,053.91 4,662,851.13 4,843,056.57
845,661.54 1,357,203.05 2,652,304.16
404,605.13 (474,977.88) (47,173,965.67)
47,328,114.81 721,786.07
1,032,399.83 49,082,300.71
(2,994,704.27) (107,634.86) (37,636.42)
(3,139,975.55)
762,449.58 (164,993.66) 597,455.92 (634,184.59) 2,777,410.87 $2,143,226.28

Annual Financial Report FY 2003 (Version 1.0) 11

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating Activities
D e pr e c ia tio n C hange in Assets and Liabilities:
Receivables, net I nv e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($49,821,942.83)
4,805,728.06
(75,116.36) (15,542.18) (37,720.24) (675,462.14) (78,544.56) (1,225,115.78) (50,249.64)
($47,173,965.67)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current Assets

$2,118,200.53 25,025.75
$2,143,226.28

Valdosta State University had no transactions to report as "Non-Cash Investing, Non-Capital Financing, and Capital and Related Financing Transactions".

Annual Financial Report FY 2003 (Version 1.0) 12

VALDOSTA STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations Valdosta State University serves the state, and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity Valdosta State University is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Valdosta State University as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Valdosta State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Valdosta State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of
Annual Financial FY 2003 (Version 1.0) 13

materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.

Basis of Accounting For financial reporting purposes, the University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-university transactions have been eliminated.

The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date.

Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.

Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.

Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments.

Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.

Inventories Consumable supplies are carried at cost on the first-in, first-out ("FIFO") basis. Inventories are valued at cost using the average-cost basis.
Annual Financial FY 2003 (Version 1.0) 14

Resale

Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Valdosta State University when complete. For the year ended June 30, 2003, GSFIC transferred capital additions valued at $2,770,341.72 to Valdosta State University.
Deposits Deposits represent good faith deposits to reserve library spaces.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities (including housing reservation fees) prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues,
Annual Financial FY 2003 (Version 1.0) 15

Expenses, and Changes in Net Assets. Valdosta State University had accrued liability for compensated absences in the amount of $2,603,631.79 as of 7-1-2002. For FY2003, $2,161,613.18 was earned in compensated absences and employees were paid $2,211,862.82, for a net decrease of $50,249.64. The ending balance as of 6-30-2003 in accrued liability for compensated absences is $2,553,382.15.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The University's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.
Annual Financial FY 2003 (Version 1.0) 16

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted Total Unrestricted Net Assets

June 30, 2003
$603,884.37
492,566.46 2,841,435.82 $3,937,886.65

Income Taxes Valdosta State University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.

Classification of Revenues The University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:

Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.

Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.

Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships.

Annual Financial FY 2003 (Version 1.0) 17

Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus Valdosta State University) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-1759:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus Valdosta State University), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Annual Financial FY 2003 (Version 1.0) 18

Categorization of Deposits
The University's cash deposits are categorized by risk as follows:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the University or by its agent in the University's name.
Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University's name.
Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the University's name, and amounts uncollateralized.
Cash Deposits as of June 30, 2003

C ash Deposits Investment Portfolio Accounts
Total C ash Deposits

C arrying Amount
$2,118,200.53

Bank Balances
$2,118,200.53

Risk C ategories

1

2

3

$100,000.00

$2,018,200.53

$2,118,200.53 $2,118,200.53 $100,000.00 $0.00 $2,018,200.53

Categorization of Investments
The University's investments are categorized as to credit risk within the three categories described below:
Category 1 - Insured or registered, or securities held by the University or its agent in the University's name
Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name.
Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University's name.

Annual Financial FY 2003 (Version 1.0) 19

At June 30, 2003, the University's investments consisted of the following:

Type of Investments
C ommon Stock C orporate Bonds Securities and C orporate O b lig a tio ns

Risk C ategories

1

2

$0.00

$0.00

3 $0.00

C arrying Amount
$0.00 0.00 0.00

Totals

$0.00

$0.00

$0.00

$0.00

Investments Not Subject to C ategorizations: Board of Regents
Short-Term Fund Balanced Income Fund Total Return Fund Investment Portfolio Accounts Mutual Funds Real Estate State Investment Pool Short-Term Investments
Total Investments

5,701,805.35
5,246,423.05 $10,948,228.40

Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool.

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2003.

June 30, 2003

S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctivities Fede ral, S tate, and Private Funds O th e r
Less A llowance for D oubtful A ccounts

$349,201.08 438,487.94
2,449,225.13 83,089.19
3,320,003.34 146,328.80

Net A ccounts Receiv able

$3,173,674.54

Annual Financial FY 2003 (Version 1.0) 20

Note 4. Inventories

Inventories consisted of the following at June 30, 2003.

B o o k sto re Fo o d S e rv ice s P hy sica l P la nt O the r
T o ta l

June 30, 2003
$ 8 1 8 ,7 3 9 .5 6 1 8 6 ,6 6 3 .3 5 6 6 ,0 7 8 .6 7
$ 1 ,0 7 1 ,4 8 1 .5 8

Note 5. Notes/Loans Receivable
Notes/Loans receivable primarily consist of student loans made through Institutional Loan funds and the Federal Perkins Loan Program (the Program).
Institutional Loans comprise $126,347.04 of the loans receivable at June 30, 2003. Each loan fund's characteristics are determined by the terms of the donor agreement. The University has not provided an allowance for uncollectible Institutional loans in the Financial Statements but writes off such loans if all collection efforts have been exhausted and the loan is under $100.
The Federal Perkins Loan Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The University has not provided an allowance for uncollectible Perkins loans in the Financial Statements and is in the process of closing out all Federal Perkins Loan Programs.

Annual Financial FY 2003 (Version 1.0) 21

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2003:

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$1,605,486.21 2,294,576.57 3,900,062.78

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

3,262,296.00 91,041,766.43
4,882,165.00 13,479,394.16
2,399,134.02 15,749,556.22
130,814,311.83

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

1,508,697.68 29,208,336.53
2,491,357.55 8,189,696.50
435,760.78 11,449,557.00
53,283,406.04

Total Capital Assets, Being Depreciated, Net 77,530,905.79

Capital Assets, net

$81,430,968.57

Additions
$73,999.00 564,554.96 638,553.96

Reductions
$0.00 1,886,015.69 1,886,015.69

Ending Balance 6/30/2003
$1,679,485.21 973,115.84
2,652,601.05

312,900.00 5,978,736.79
589,392.00 1,008,293.50
1,055,305.32
8,944,627.61

3,262,296.00 0.00
873,466.00 426,341.74 287,004.90
33,775.35
4,882,883.99

312,900.00 97,020,503.22
4,598,091.00 14,061,345.92
2,112,129.12 16,771,086.19
0.00 134,876,055.45

(719,301.05) 30,965.03
2,257,702.88 60,662.94
892,027.50
2,522,057.30
6,422,570.31
$7,061,124.27

1,508,697.68 (730,262.97) 285,971.41 1,375,042.47
58,605.39 33,674.04
2,531,728.02

0.00 29,219,298.45
2,236,351.17 9,072,356.91
437,818.33 12,307,910.46
0.00 53,273,735.32

2,351,155.97

81,602,320.13

$4,237,171.66 $84,254,921.18

Annual Financial FY 2003 (Version 1.0) 22

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2003.

Pre pa id Tuition a nd Fe e s Research O ther D eferred R ev enue
Tota ls

June 30, 2003 $470,639.83 459,035.32 $929,675.15

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2003 was as follows.

Leases Lease Obligations

Beginning Balance July 1, 2002
$482,584.52

Additions

Reductions

Ending Balance June 30, 2003

$0.00

$51,737.26 $430,847.26

Current Portion
$78,913.16

Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total

2,603,631.79 283,510.78
2,887,142.57

2,161,613.18 2,161,613.18

2,211,862.82 (1,485.28)
2,210,377.54

2,553,382.15 284,996.06
2,838,378.21

1,396,232.89 26,400.86
1,422,633.75

Total Long Term Obligations

$3,369,727.09 $2,161,613.18 $2,262,114.80 $3,269,225.47 $1,501,546.91

(a) The beginning balance includes the amount reported as current in FY2002 and reclassified as long-term in FY2003.

Note 9. Lease Obligations
Valdosta State University is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property.
Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2003, were as follows:

Annual Financial FY 2003 (Version 1.0) 23

Year Ending June 30:

Year

2004

1

2005

2

2006

3

2007

4

2008

5

2009 through 2013

6-10

2014 through 2018

11-15

2019 through 2023

16-20

2024 through 2028

21-25

2029 through 2033

26-30

2034 through 2038

31-35

2039 through 2043

36-40

Total m inim um lease paym ents

Less: Interest

Less: Executory costs (if paid)

Principal O utstanding

Real Property

C apital Lease s

Operating Leases

$78,895.94 84,171.52 63,339.69 34,529.02
169,911.09

$594,000.00 594,000.00 492,000.00 369,000.00 228,600.00 180,600.00 180,600.00

430,847

$2,638,800.00

$430,847.26

CAPITAL LEASES

Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2005 and 2011. Expenditures for capital leases for fiscal year 2003 were $143,520.00 of which $37,136.66 represented interest and $106,383.34 represented principal paid. Interest rates range from 4.59 percent to 8.15 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2003:

Land Equipment Buildings
Totals

$ 182,141.73 5,700.03
1,924,287.36 $ 2,112,129.12

Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms.

All of the capital leases above except the equipment were between Valdosta State University and the Valdosta State University Foundation, a related entity, and are detailed as follows:

Property
Land - Lake Louise Bldg Storage Bldg University Park Bldg Storage

Begin Date
1-1-96 7-1-96 7-1-96 2-1-02

End Date
6-1-05 6-1-06 6-1-06 6-1-11

Interest Rate
6.00 5.035 5.035 8.15

Total Lease Amount
$239,400.00 $156,000.00 $156,000.00 $470,080.00

Annual Financial FY 2003 (Version 1.0) 24

The lease purchase obligation at June 30, 2003 on these capital leases is $429,595.77. The University at its option may terminate the leases.

Valdosta State University also has one capital lease for equipment with an outstanding balance at June 30, 2003 in the amount of $1,251.52.

OPERATING LEASES

Valdosta State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2005 through 2011. Certain operating leases provide for renewal options for a period of one year up to a total of nine years. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are buildings that do not meet the Board of Regents capitalization requirements, copiers and other small business equipment.

Noncancellable operating lease expenditures in 2003 were $559,429.10 for real property.

Note 10. Retirement Plans

Teachers Retirement System Of Georgia

Plan Description Valdosta State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Valdosta State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Valdosta State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%
Annual Financial FY 2003 (Version 1.0) 25

$2,968,322.25 $2,912,449.91 $3,650,334.35

Regents Retirement Plan
Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.
Funding Policy Valdosta State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statue and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.
Valdosta State University and the covered employees made the required contributions of $1,557,051.15 (10.02%) and $776,976.39 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description Valdosta State University participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon
Annual Financial FY 2003 (Version 1.0) 26

termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $86,393.01 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
Valdosta State University is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Valdosta State University and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Valdosta State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which
Annual Financial FY 2003 (Version 1.0) 27

are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Valdosta State University expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Valdosta State University (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 315 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, Valdosta State University recognized as incurred $1,069,056.44 of expenditures, which was net of $359,354.47 of participant contributions.
Annual Financial FY 2003 (Version 1.0) 28

Note 14. Natural Classifications With Functional Classifications The University's operating expenses by functional classification for FY2003 are shown below. In FY2003, Depreciation expense was adjusted to recognize 10% of the residual value of the following asset categories: Buildings and Building Improvements, Facilities and Other Improvements, and Infrastructure. However, for reporting purposes, the portion of this adjustment that was related to prior years has been shown on the Statement of Revenues, Expenses, and Changes in Net Assets as a Prior Year Adjustment to Net Assets. Functional expenditures for the Operation and Maintenance of Plant during 2003 as shown below include $2,469,450.91 for the prior year depreciation adjustment. Functional expenditures for Auxiliary Services during 2003 as shown below include $801,009.99 for the prior year depreciation adjustment.
Annual Financial FY 2003 (Version 1.0) 29

S ta te m e nt o f O pe ra ting Ex pe nse s - Na tura l v s Functio na l C la ssifica tio ns Fo r the Fisca l Y e a r Ende d June 30, 2003

Functio na l C la ssifica tio n FY2003

N atural C las s ific atio n

In s t ru c t io n

R esearch

P ublic Serv ic e

A c adem ic Suppo rt

F ac ulty Staff B enefits P ers o nal Serv ic es T ravel Sc ho lars hips and F ello ws hips Ut ilit ie s Supplies and O thers Serv ic es D eprec iatio n

$ 2 7 ,717 ,8 12 .16 2 ,6 3 7 ,00 7 .2 4 7,3 5 8 ,4 18 .6 3 10 9 ,8 10 .0 0 2 2 2 ,38 8 .8 3 14 8 ,32 5 .0 4 4 6 9 ,4 4 4 .3 1 1,9 5 1,84 8 .6 9 4 4 7 ,47 5 .9 6

$ 0 .00

$ 9 6 ,9 7 8 .25 5 8 3 ,3 9 3 .9 0 16 3 ,8 9 0 .73
71,3 19 .92
15 9 ,2 0 9 .36 3 8 ,4 3 7 .79

$ 2 0 0 ,3 4 5 .64 3,7 4 2 ,8 4 8 .34
9 4 2 ,6 6 7 .96 13 4 ,0 8 6 .29 2 3 2,0 0 1.69
3 2,13 6 .00 2 5,3 18 .45 8 3 0 ,3 2 6 .20 1,0 4 5,16 9 .36

T o tal Expens es

$ 41,0 6 2 ,53 0 .8 6

$ 0 .00

$ 1,113 ,2 2 9 .95

$ 7 ,18 4 ,8 9 9 .93

Student Serv ic es
$ 7 5.0 0 2 ,9 85 ,3 4 6.3 5
7 78 ,4 4 3.2 5 29 ,7 6 8.9 7 10 3 ,14 4.8 9
76 ,7 3 6.3 2 1,4 63 ,9 3 8.0 6
4 3 ,3 14.6 8
$ 5 ,4 80 ,7 6 7.5 2

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003

Natural C lassification

Institutio nal Suppo rt

Functional Classification F Y 2003

P lant

Operatio ns

Scho larships

A uxiliary

& M aintenance

& Fello wships

Enterprises

Unallo cated Expenses

To tal Expenses

Faculty Staff B enefits P erso nal Services Travel Scho larships and Fello wships Utilities Supplies and Others Services Depreciatio n

$ 13,342.34 5,660,238.51 2,973,929.06
44,609.81 57,766.96
166,515.36 3,556,288.42
412,300.56

$ 0.00 3,436,937.51 1,210,068.75 (1,008,984.49)
3,200.38
2,257,367.46 1,330,003.58 2,365,292.87

$ 0.00 3,505,326.35

$ 16,522.50 5,319,288.33 1,403,308.43 1,039,881.21
325,901.73 715,748.72 325,701.79 9,178,046.29 453,736.84

$ 28,045,075.89 24,365,060.18 14,830,726.81 349,171.79 1,015,724.40 4,401,536.11 3,321,083.69 18,469,660.60 4,805,728.06

To tal Expenses

$ 12,884,991.02

$ 9,593,886.06

$ 3,505,326.35

$ 18,778,135.84

$ 0.00

$ 99,603,767.53

Annual Financial FY 2003 (Version 1.0) 30

WAYCROSS COLLEGE
Financial Report
For the Year Ended June 30, 2003

Barbara P. Losty
President

Waycross College Waycross, Georgia
William E. Deason
Vice President for Fiscal Affairs

WAYCROSS COLLEGE ANNUAL FINANCIAL REPORT
FY 2003
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 9 Statement of Revenues, Expenses and Changes in Net Assets.......................................... 10 Statement of Cash Flows ................................................................................................... 11 Note 1 Summary of Significant Accounting Policies ...................................................... 13 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 18 Note 3 Accounts Receivable............................................................................................. 20 Note 4 Inventories............................................................................................................. 21 Note 5 Notes/Loans Receivable........................................................................................ 21 Note 6 Capital Assets........................................................................................................ 22 Note 7 Deferred Revenue.................................................................................................. 23 Note 8 Long-Term Liabilities ........................................................................................... 23 Note 9 Lease Obligations.................................................................................................. 23 Note 10 Retirement Plans ................................................................................................. 24 Note 11 Risk Management................................................................................................ 25 Note 12 Contingencies...................................................................................................... 26 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 26 Note 14 Natural Classifications With Functional Classifications..................................... 28

WAYCROSS COLLEGE
Management's Discussion and Analysis

Introduction

Waycross College is one of the 34 institutions of the University System of Georgia. The College, located in Waycross, Georgia, was founded in 1976 and has become known for its liberal arts transfer programs. The College offers associate degrees in a wide variety of subjects. This wide range of educational opportunities attracts a highly qualified faculty and a student body of more than 2,100 students each year. The institution's enrollment is beginning to grow after several years of remaining stable as shown by the comparison numbers that follow.

Faculty

Students

FY2003 FY2002 FY2001

21

2,332

21

2,180

21

2,100

Overview of the Financial Statements and Financial Analysis

Waycross College is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets, the Statement of Revenues, Expenses, and Changes in Net Assets, and the Statement of Cash Flows. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2002 and FY 2003.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Waycross College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements.

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major
Annual Financial Report FY 2003 (Version 1.0) 1

categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

A sse ts: C urrent A ssets C apital A ssets, net O the r A ssets Total A ssets

June 30, 2003
$858,695.93 9,345,652.58
246,417.25 10,450,765.76

June 30, 2002
$1,221,904.94 9,428,332.03
10,650,236.97

Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities

311,879.81 153,351.67 465,231.48

327,005.59 327,005.59

Net A ssets: Invested in C apital A sse ts, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets

9,345,652.58 130,240.03 92,305.89
417,335.78 $9,985,534.28

9,428,332.03 80,190.03
150,798.62
663,910.70 $10,323,231.38

The total assets of the institution decreased by ($199,471.21). A review of the Statement of Net Assets will reveal that the decrease was primarily due to a decrease of ($484,084.09) in Cash and ($82,679.45) of investment in plant, net of accumulated depreciation. See Note 1 in the notes to the financial statements for additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets. Of the ($484,084.09) decrease in cash, ($246,417.25) was due to the reclassification of an investment from cash to investments and ($238,666.84) was attributable to budget reductions. Other asset categories, current and noncurrent, showed an increase during the year. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution.
The total liabilities for the year increased by $138,225.89. The primary cause for the increase was in current liabilities, compensated absences $43,680.79, deferred revenue $38,479.23 and deposits held for other organizations $65,675.69. The combination of the decrease in total assets of ($199,471.21) and the increase in total liabilities of $138,225.89 yields a decrease in total net
Annual Financial Report FY 2003 (Version 1.0) 2

assets of ($337,697.10). The decrease in total net assets is primarily in the category of Unrestricted Net Assets in the amount of ($246,574.92).

Statement of Revenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30, 2003

Operating Revenues Operating Expenses Operating Loss

$2,273,626.90 6,688,154.22 (4,414,527.32)

Nonoperating Revenues and Expenses

3,626,458.42

Incom e (Loss) B efore other revenues, expenses, gains or losses

(788,068.90)

Other revenues, expenses, gains or losses

Increase in Net Assets

(788,068.90)

Net Assets at beginning of year, as originally reported C um ulative effect of changes in accounting principle Prior Year Adjustm ents Net Assets at beginning of year, restated

10,323,231.38
450,371.80 10,773,603.18

Net Assets at End of Year

$9,985,534.28

June 30, 2002 $2,069,265.96
6,445,472.40 (4,376,206.44) 4,145,528.00
(230,678.44)
(230,678.44) 18,211,212.41
7,657,302.59 10,553,909.82 $10,323,231.38

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a decrease in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:

Total operating revenue increases of $ 204,360.94 are primarily due to a $ 98,677.28 increase in student tuition and fees; a $ 75,609.67 increase in federal grants; and a $ 40,373.17 increase in auxiliary enterprise revenue.
Annual Financial Report FY 2003 (Version 1.0) 3

Total operating expense increased by $242,681.82 Salaries and benefits cost increased by $241,075.99, scholarships by $ 66,162.60, and supplies and other services by $40,200.10. Travel expense decreased by ($ 27,869.32), utilities by ($15,746.77), and depreciation expense by ($61,140.78). The change in depreciation expense is partially due to recording residual value for assets in the amount of $ 47,901.83. Non-operating revenue and expense decreases of ($519,069.58) are attributed to a decrease in state appropriations of ($ 522,990.56).
Annual Financial Report FY 2003 (Version 1.0) 4

Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002
Operating Revenue Tuition and Fees G rants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O th e r
Total Operating Revenue
Nonoperating Revenue State Appropriations G ifts Investment Incom e Grants and C ontracts O th e r
Total Nonoperating Revenue
C apital Gifts and G rants State C apital Appropriations Other C apital G ifts and Grants
Total C apital G ifts and G rants
Total Revenues

June 30, 2003
$639,751.39 1,168,532.02
21,971.85 423,932.63
19,439.01 2,273,626.90
3,606,126.44 4,723.97
16,823.89 (1,215.88) 3,626,458.42
0.00 $5,900,085.32

June 30, 2002
$557,391.10 1,074,279.63
28,669.00 383,559.46
25,366.77 2,069,265.96
4,129,117.00 11,425.00 4,986.00
4,145,528.00
0.00 $6,214,793.96

Annual Financial Report FY 2003 (Version 1.0) 5

Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003 $1,638,566.48
802,309.36 687,686.96 1,137,874.54 797,194.04 647,144.50 409,480.49 567,897.85 6,688,154.22
$6,688,154.22

June 30, 2002 $1,571,616.92
791,126.41 625,611.14 1,077,175.37 784,586.43 580,981.90 385,335.60 629,038.63 6,445,472.40
$6,445,472.40

Non-operating revenue decreased by approximately $519,000. This is primarily a result of the decrease in state appropriation of approximately $523,000. Of this amount $330,500 was general state appropriations and $192,500 was for major repair and rehabilitation projects. Major repair and rehabilitation projects were funded with bond funds this year and are not reflected as revenue. An allocation of $130,303 was received for major repair and rehabilitation projects. The loss of approximately $330,500 in general operations funds is significant to the College. These reductions come at a time of increases in enrollment but decreases in state revenue due to economic conditions.
Operating revenues increased by approximately $204,400. This is due to increases in enrollment, federal, state, and private grants, and auxiliary enterprises sales associated with increases in enrollment. Only about $ 67,700 of these increases is available to partially offset the decrease in state appropriations.
The compensation and employee benefits category increased by $241,075.99. The increase reflects a pay raise for the employees of the institution of approximately three percent with the associated fringe benefits. The increase also reflects an increased cost of health and life insurance for the employees of the institution.
Utilities decreased by ($15,746.77) during the past year. The decrease was due primarily to cost savings measures taken by the institution.
Under non-operating revenues (expenses) state appropriations decreased by approximately ($522,990.56). While revenue from increased enrollment offset this decrease by approximately
Annual Financial Report FY 2003 (Version 1.0) 6

$67,700, this decrease has caused the institution to make dramatic reductions in staff and operating expenses.

Statement of Cash Flows

The final statement presented by the Waycross College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Year Ended June 30, 2003, Condensed

C ash Provided (used) By: Operating Activities Non-capital Financing Activities Investing Activities C apital and Related Financing A ctivities
Net C hange in C ash C ash, Beginning of Year
C ash, End of Year

June 30, 2003
($ 3 ,8 2 8 ,4 4 2 .6 5 ) 3 ,5 9 9 ,9 2 3 .3 1 (2 2 9 ,2 0 0 .0 4 ) (2 6 ,4 3 7 .3 6 )
(4 8 4 ,1 5 6 .7 4 ) 9 9 6 ,6 7 3 .6 0
$ 5 1 2 ,5 1 6 .8 6

Capital Assets

The College had no significant capital asset additions for facilities in fiscal year 2003. The renovation of our biology lab and prep room began in April and is scheduled for completion in August. This $ 130,303 project is being funded by the Georgia State Finance and Investment Commission (GSFIC). Projected funding by GSFIC for FY 2004 will be approximately $ 181,715.

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Economic Outlook

The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year
Annual Financial Report FY 2003 (Version 1.0) 7

beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is strong. While the College has been able to manage the sizable reductions in state funding through reductions in vacant positions, in part time staff and operating expense and increases in operating revenue, any additional reductions will most probably result in reductions in current full time staff and services. The College anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues. _______________________ Barbara P. Losty, President Waycross College
Annual Financial Report FY 2003 (Version 1.0) 8

Statement of Net Assets
W a y c ro s s C o lle g e STA TE M E NT O F NE T A SSE TS
June 30, 2003
ASSETS Cu rre n t A s s e ts C a s h a n d C a s h E q u iv a le n ts S h o rt-te rm In v e s tm e n ts A c c o u n ts R e c e iv a b le , n e t In v e n to rie s O th e r A s s e ts T o ta l C u rre n t A s s e ts
No n c u rre n t A s s e ts Noncurrent C ash In v e s tm e n ts N o te s R e c e iv a b le , n e t C a p ita l A s s e ts , n e t T o ta l N o n c u rre n t A s s e ts TOTAL ASSETS
LIA BILIT IE S C u rre n t Lia b ilitie s A c c o u n ts P a y a b le a n d A c c ru e d Lia b ilitie s D e p o s its D e fe rre d R e v e nue O th e r Lia b ilitie s D e p o s its H e ld fo r O th e r O rg a n iz a tio n s C o m p e n s a te d A b s e n c e s (c u rre n t p o rtio n ) T o ta l C u rre n t Lia b ilitie s N o n c u rre n t Lia b ilitie s C o m p e n s a te d A b s e n c e s Lo n g -te rm Lia b ilitie s T o ta l N o n c u rre n t Lia b ilitie s T OT A L LIA BILIT IE S
NET ASSETS In v e s te d in C a p ita l A s s e ts , n e t o f re la te d d e b t R e s tric te d fo r N o n e x p e n d a b le E x p e n d a b le C a p ita l P ro je c ts U n re s tric te d TOTAL NET ASSETS

June 30, 2003
$ 5 1 2 ,5 1 6 .8 6 2 5 6 ,6 5 7 .1 4 8 8 ,5 7 6 .9 7 9 4 4 .9 6 8 5 8 ,6 9 5 .9 3
2 4 6 ,4 1 7 .2 5 9 ,3 4 5 ,6 5 2 .5 8 9 ,5 9 2 ,0 6 9 .8 3 1 0 ,4 5 0 ,7 6 5 .7 6
4 8 ,2 8 4 .4 9 2 0 1 ,4 8 7 .3 9
5 ,7 2 5 .0 8 5 ,5 4 4 .4 2 5 0 ,8 3 8 .4 3 3 1 1 ,8 7 9 .8 1 1 5 3 ,3 5 1 .6 7 1 5 3 ,3 5 1 .6 7 4 6 5 ,2 3 1 .4 8
9 ,3 4 5 ,6 5 2 .5 8 1 3 0 ,2 4 0 .0 3 9 2 ,3 0 5 .8 9 4 1 7 ,3 3 5 .7 8
$ 9 ,9 8 5 ,5 3 4 .2 8

Annual Financial Report FY 2003 (Version 1.0) 9

Statement of Revenues, Expenses and Changes in Net Assets

Wa y cross C ollege STATEMENT of REVENUES, EXPENSES, a nd C HANGES in NET ASSETS
for the Y ea r Ende d June 30, 2003
June 30, 2003

RE VE NU E S

O perating Revenues

S tudent Tuition and Fees

$1,083,849.89

Less: Sponsored and Unsponsored Scholarships

(444,098.50)

Fe de ral A ppropria tions

Federal G rants and C ontracts

1,058,897.58

S tate and Lo cal G rants and C ontra cts

33,994.22

Nongo v e rnm e ntal G ra nts and C ontracts

75,640.22

S ale s a nd S e rv ice s o f Educa tional D e partm e nts

21,971.85

A uxiliary Enterprises

423,932.63

O ther O perating Rev enues

19,439.01

Total O pe rating R e v e nue s

2,273,626.90

E XPE NS E S

O perating Expense s

S a la r ie s :

Fa c u lty S taff

1,088,102.88 1,964,141.58

B e ne fits O ther Personal S ervice s

929,012.61

Travel

33,798.14

Scholarships and Fellowships

647,144.50

U tilitie s

193,464.95

S upplie s and O ther S ervice s D epreciation

1,256,079.21 576,410.35

Total O perating Ex penses

6,688,154.22

O pe rating Incom e (loss) NONOPERA T ING RE VENUE S (EXPENSES)

(4,414,527.32)

S tate A ppropria tions

3,606,126.44

G ifts

4,723.97

Investm e nt Incom e (endowm ents, aux iliary and other)

16,823.89

Inte re st Ex pe nse (ca pita l a sse ts)

O the r Nonope rating R e v e nue s

(1,215.88)

Ne t Nonope ra ting R e v e nue s

3,626,458.42

Incom e before other revenues, expenses, gains, or loss

(788,068.90)

S tate C apital A ppropriations

C apital G rants and G ifts

Fe de ral G rants & C ontracts

S tate G rants & C ontracts

O the r G rants and C ontracts

Total O ther Rev enues

0.00

Incre ase in Net A ssets NET ASSETS

(788,068.90)

Ne t A sse ts-be ginning of y e ar, a s originally re porte d

10,323,231.38

C um ulative effect of changes in accounting principle

Prior Year A djustm ents

450,371.80

Net A ssets-beginning of year, restated

10,773,603.18

Net A ssets-End of Year

$9,985,534.28

Annual Financial Report FY 2003 (Version 1.0) 10

Statement of Cash Flows
Waycross C ollege STATEMENT OF CASH FLOWS For the Year Ended June 30, 2003
CASH F LOWS F ROM OPE RATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales and Services of Educational D epartm ents Paym ents to Suppliers Paym ents to Em ployees Paym ents for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls B ookstore Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (paym ents) Net C ash Provided (used) by Operating Activities
CASH F LOWS F ROM NON- CAPIT AL F INANCING ACT IVITIES State Appropriations Agency Funds Transactions Gifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities
CASH F LOWS F ROM CAPITAL AND RE LATED F INANCING ACTIVIT IE S C apital Grants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities
CASH F LOWS F ROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investm ents Interest on Investm ents Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003
$1,119,072.47
1,131,264.25 22,950.25
(2,398,602.45) (3,052,244.46) (1,091,243.00)
349,372.71 46,326.69
25,154.53 19,506.36 (3,828,442.65)
3,606,126.44 (10,183.13) 3,980.00
3,599,923.31
(26,437.36)
(26,437.36)
(2,403.91) 19,621.12 (246,417.25) (229,200.04) (484,156.74) 996,673.60 $512,516.86

Annual Financial Report FY 2003 (Version 1.0) 11

Statement of Cash Flows, Continued
RECONCILIA TION OF OPERA TING LOSS TO NET CA SH PROVIDE D (USED) BY OPE RATING A CTIVITIES:
Operating Incom e (loss) A djustments to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating Activities
D epreciation C hange in Assets and Liabilities:
Receivables, net I n v e n to r ie s Other Assets A ccounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($4,414,527.32)
576,410.35
(30,517.02) (5,923.92) (699.96)
(19,557.88) 28,252.56
4,298.38 33,822.16
($3,828,442.65)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current Assets

$512,516.86 $512,516.86

** NON-C ASH INVESTING, NON-C APITAL FINANC ING, AND C APITAL AND RELATED FINANC ING TRANSAC TIONS

C hange in fair value of investm ents recognized as a component of interest i C hange in interest receivable affecting interest received

$11,667.42 $393.32

Annual Financial Report FY 2003 (Version 1.0) 12

WAYCROSS COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations Waycross College serves the southeastern region of Georgia by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Southeast Georgia.
Reporting Entity Waycross College is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Waycross College as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Waycross College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Waycross College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the College is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of
Annual Financial Report FY 2003 (Version 1.0) 13

materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
Basis of Accounting For financial reporting purposes, the College is considered a special-purpose government engaged only in business-type activities. Accordingly, the College's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-college transactions have been eliminated.
The College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The College accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Consumable supplies are carried at the lower of cost or market on either the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis.
Annual Financial Report FY 2003 (Version 1.0) 14

Non-current Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the College's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia (and thus Waycross College) recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Waycross College when complete. For the year ended June 30, 2003, GSFIC transferred no capital additions to Waycross College.
Deferred Revenues Deferred revenues include amounts received for tuition and fees prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Waycross College had accrued liability for compensated absences in the amount of $160,509.31 as of 6-30-2002. For FY2003, this amount was adjusted for FICA for an additional $9,858.63. Also in FY2003, $162,224.69 was earned in compensated absences and employees were paid $128,402.53, for a net increase of $43,680.79. The ending balance as of 6-30-2003 in accrued liability for compensated absences is $204,190.10.
Annual Financial Report FY 2003 (Version 1.0) 15

Non-current Liabilities Non-current liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The College's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.
Annual Financial Report FY 2003 (Version 1.0) 16

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Reserve Reserve for Encumbrances Reserv e for Inventory O the r Unrestricted Total Unrestricted Net A ssets

June 30, 2003
$184,658.33 69,623.61 10,500.00
152,553.84 $417,335.78

When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.

Income Taxes Waycross College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.

Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:

Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.

Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.

Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the College, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for sponsored and unsponsored scholarships.

Annual Financial Report FY 2003 (Version 1.0) 17

Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus Waycross College) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus Waycross College), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Categorization of Deposits
The College's cash deposits are categorized by risk as follows:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the College or by its agent in the College's name.
Annual Financial Report FY 2003 (Version 1.0) 18

Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the College's name.

Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the College's name, and amounts uncollateralized.

Cash Deposits as of June 30, 2003

C ash Deposits Investment Portfolio Accounts
Total C ash Deposits

C arrying Amount
$464,926.19

Bank Balances
$627,124.86

Risk C ategories

1

2

3

$100,000.00

$0.00 $527,124.86

$464,926.19

$627,124.86 $100,000.00

$0.00 $527,124.86

Categorization of Investments
The College's investments are categorized as to credit risk within the three categories described below:
Category 1 - Insured or registered, or securities held by the College or its agent in the College's name
Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the College's name.
Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the College's name.

Annual Financial Report FY 2003 (Version 1.0) 19

At June 30, 2003, the College's investments consisted of the following:

Type of Investm ents
C om m on S tock C orporate Bonds S ecurities and C orporate O bligations

Risk C ategories

1

2

$0.00

$0.00

3 $0.00

T o ta ls

$0.00

$0.00

$0.00

C arrying Amount
$0.00
$0.00

Investm ents Not S ubject to C ategorizations: B oard of R egents
S hort-Term Fund Balanced Income Fund Total Return Fund Investm ent Portfolio A ccounts Mutual Funds R eal Estate S tate Investm e nt Pool S hort-Term Investm ents
Total Investm ents

46,313.27 247,460.68
$293,773.95

Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the College did not own any specific, identifiable investment securities of the pool.

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2003.

S tu d e n t T u itio n a n d Fe e s A u x ilia ry E n te rp ris e s a n d O th e r O p e ra tin g A c tiv itie s Fe d e ra l, S ta te , a n d P riv a te Fu n d s O th e r
Le s s A llo w a n c e fo r D o u b tfu l A c c o u n ts
N e t A c c o u n ts R e c e iv a b le

June 30, 2003
$ 1 3 ,5 5 7 .1 1 1 6 ,1 1 1 .2 8
2 3 0 ,3 1 3 .8 0 8 4 8 .3 0
2 6 0 ,8 3 0 .4 9 4 ,1 7 3 .3 5
$ 2 5 6 ,6 5 7 .1 4

Annual Financial Report FY 2003 (Version 1.0) 20

Note 4. Inventories

Inventories consisted of the following at June 30, 2003.

B o o k sto re Fo o d S e rv ice s P hy sica l P la nt O the r
T o ta l

June 30, 2003
$72,340.89 4,731.40
11,504.68 $88,576.97

Note 5. Notes/Loans Receivable The College does not have Notes/Loans receivable.

Annual Financial Report FY 2003 (Version 1.0) 21

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2003.

C apital Assets, Not Being Depreciated: Land C onstruction Work-in-Progress
Total C apital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$358,789.49
358,789.49

C apital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment C apital Leases Library C ollections C apitalized C ollections Total Assets Being Depreciated

1,343,722.00 10,910,220.50
980,473.00 1,398,657.73
1,122,717.54
15,755,790.77

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment C apital Leases Library C ollections C apitalized C ollections Total Accumulated Depreciation

681,889.98 3,284,939.06
710,825.43 968,884.07
1,039,709.69
6,686,248.23

Total C apital Assets, Being Depreciated, Net 9,069,542.54

C apital Assets, net

$9,428,332.03

Additions $0.00 0.00

Reductions $0.00 0.00

Ending Balance 6/30/2003
$358,789.49 0.00
358,789.49

15,648.44 11,532.89 27,181.33

171,190.64 24,084.63
195,275.27

1,343,722.00 10,910,220.50
980,473.00 1,243,115.53
0.00 1,110,165.80
0.00 15,587,696.83

56,200.45 323,196.80
51,719.17 91,003.93
54,290.00
576,410.35

68,189.00 328,493.91
71,082.54 169,974.76
24,084.63
661,824.84

669,901.43 3,279,641.95
691,462.06 889,913.24
0.00 1,069,915.06
0.00 6,600,833.74

(549,229.02) (466,549.57) 8,986,863.09

($549,229.02) ($466,549.57) $9,345,652.58

Annual Financial Report FY 2003 (Version 1.0) 22

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2003.

P r e p a id T u itio n a n d Fe e s R esearch O th e r D e fe r re d R e v e n u e
T o ta ls

June 30, 2003 $ 1 9 1 ,2 6 0 .7 2 1 0 ,2 2 6 .6 7 $ 2 0 1 ,4 8 7 .3 9

Note 8. Long-Term Liabilities

Long-term liability activity for the years ended June 30, 2003.

Beginning

Balance

July 1, 2002

Additions

Reductions

Leases

Lease Obligations

$0.00

$0.00

$0.00

Ending Balance June 30, 2003
$0.00

C urrent Portion
$0.00

Other Liabilities C ompensated Absences (a) Other Long Term Liabilities Total

160,509.31 160,509.31

172,083.32 128,402.53 172,083.32 128,402.53

204,190.10 0.00
204,190.10

50,838.43 50,838.43

Total Long Term Obligations

$160,509.31 $172,083.32 $128,402.53 $204,190.10 $50,838.43

(a) The beginning balance includes the amo unt sho wn as current in FY2002 and reclasssified as lo ng-term in FY2003

Additions include FIC A adjustment of $9,858.63

Note 9. Lease Obligations

Waycross College is not obligated under any operating leases for the use of real property (land, buildings, and office facilities) and equipment, nor is it obligated under capital leases and installment purchase agreements for the acquisition of real property.

Annual Financial Report FY 2003 (Version 1.0) 23

Note 10. Retirement Plans

Teachers Retirement System Of Georgia

Plan Description Waycross College participates in the Teachers Retirement System of Georgia (TRS), a costsharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Waycross College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Waycross College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$184,714.97 $180,268.71 $214,918.73

Regents Retirement Plan

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.

Funding Policy Waycross College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statue and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation. Employees contribute 5% of their

Annual Financial Report FY 2003 (Version 1.0) 24

earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times.
Waycross College and the covered employees made the required contributions of $82,114.10 (10.02%) and $40,975.21 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description Waycross College participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $5,259.04 which represents 7.5 % of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
Waycross College is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Waycross College and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue
Annual Financial Report FY 2003 (Version 1.0) 25

Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Waycross College, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Waycross College expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Waycross College (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
Note 13. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University
Annual Financial Report FY 2003 (Version 1.0) 26

System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 15 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, Waycross College recognized as incurred $59,970.66 of expenditures, which was net of $26,460.04 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 27

Note 14. Natural Classifications With Functional Classifications

The College's operating expenses by functional classification for FY2003 are shown below:

S t a t e me n t o f O p e ra t in g E xp e n s e s - Na t u ra l v s F u n c t io n a l C la s s if ic a t io n s F o r t h e F is c a l Y e a r E n d e d Jun e 3 0, 2 00 3
F u n c t io n a l C la s s if ic a t io n FY 2003

N atural C las s ific atio n

In s t ru c t io n

R esearc h

P ublic Serv ic e

A c adem ic Suppo rt

Student Serv ic es

F ac ulty Staff B enefits P ers o nal Serv ic es T ravel Sc ho lars hips and F ello ws hips Ut ilit ie s Supplies and O thers S erv ic es D eprec iatio n

$ 1,0 7 8 ,3 4 2 .8 8 16 2 ,12 5 .0 0 3 16 ,3 4 3 .4 1
2 ,7 6 6 .4 4
2 ,9 4 1.4 9 7 6 ,0 4 7 .2 6

$ 0 .0 0

$ 0 .0 0

$ 0 .0 0 3 9 3 ,14 0 .7 7 10 6 ,18 4 .9 3
7 ,5 3 9 .5 9
3 3 ,6 14 .12 2 6 1,8 2 9 .9 5

$ 9 ,7 6 0 .0 0 3 8 4 ,7 6 2 .4 9
9 4 ,9 4 7 .4 6
12 ,6 7 0 .2 8
3 ,7 10 .9 2 18 1,8 3 5 .8 1

T o tal Expens es

$ 1,6 3 8 ,5 6 6 .4 8

$ 0 .0 0

$ 0 .0 0

$ 8 0 2 ,3 0 9 .3 6

$ 6 8 7 ,6 8 6 .9 6

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003

Natural Classificatio n

Institutio nal Suppo rt

Functional Classification FY 2003

P lant

Operatio ns

Scho larships

A uxiliary

Unallo cated

& M aintenance & Fello wships

Enterprises

Expenses

Faculty Staff B enefits P erso nal Services Travel Scho larships and Fello wships Utilities Supplies and Others Services Depreciatio n

$ 0.00 652,300.52 294,417.07
10,362.87
(476.27) 181,270.35

$ 0.00 309,000.40 104,476.52
(4,317.02) 439.37
152,776.35 234,818.42

$ 0.00 647,144.50

$ 0.00 62,812.40 12,643.22
4,317.02 19.59
898.34 320,277.42
8,512.50

$ 0.00 567,897.85

To tal Expenses

$ 1,137,874.54

$ 797,194.04

$ 647,144.50

$ 409,480.49

$ 567,897.85

To tal Expenses
$ 1,088,102.88 1,964,141.58 929,012.61 0.00 33,798.14 647,144.50 193,464.95 1,256,079.21 576,410.35
$ 6,688,154.22

Annual Financial Report FY 2003 (Version 1.0) 28

STATE UNIVERSITY OF WEST GEORGIA
Financial Report
For the Year Ended June 30, 2003

State University of West Georgia Carrollton, Georgia

Dr. Beheruz N. Sethna
President

William N. Gauthier
Senior Vice President for Fiscal Affairs

STATE UNIVERSITY OF WEST GEORGIA ANNUAL FINANCIAL REPORT FY 2003
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 8 Statement of Revenues, Expenses and Changes in Net Assets............................................ 9 Statement of Cash Flows ................................................................................................... 10 Note 1 Summary of Significant Accounting Policies ...................................................... 12 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 17 Note 3 Accounts Receivable............................................................................................. 19 Note 4 Inventories............................................................................................................. 20 Note 5 Notes/Loans Receivable........................................................................................ 20 Note 6 Capital Assets........................................................................................................ 21 Note 7 Deferred Revenue.................................................................................................. 22 Note 8 Long-Term Liabilities ........................................................................................... 22 Note 9 Lease Obligations.................................................................................................. 22 Note 10 Retirement Plans ................................................................................................. 24 Note 11 Risk Management................................................................................................ 25 Note 12 Contingencies...................................................................................................... 26 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 26 Note 14 Natural Classifications With Functional Classifications..................................... 28

STATE UNIVERSITY OF WEST GEORGIA
Management's Discussion and Analysis

Introduction

State University of West Georgia is one of the 34 institutions of the University System of Georgia. State University of West Georgia, a charter member of the University System of Georgia, is a selectively focused, public, comprehensive institution providing undergraduate and graduate education in arts and sciences, business and education. The University's primary recruiting area is central and northwest Georgia.

West Georgia offers a range of disciplinary, interdisciplinary, and professional programs at the baccalaureate level. The State University of West Georgia offers 112 programs of study, including 59 at the Bachelors level, 52 at the Masters and Specialist level, and one Doctoral program. It is also a major provider of graduate education at the master's and educational specialist's levels; enhancing the graduate programs in Education, with an Ed.D in School Improvement. West Georgia is accredited by the Southern Association of Colleges & Schools (SACS). In addition, the University has earned national accreditation or recognition in most undergraduate and graduate fields of specialization. The institution continues to grow as shown by the comparison numbers that follow.

Faculty

Students

FY2003 FY2002 FY2001

355

9,675

344

9,030

343

8,966

Overview of the Financial Statements and Financial Analysis

State University of West Georgia is proud to present its financial statements for fiscal year 2003. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2002 and FY 2003.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of State University of West Georgia. The Statement of Net Assets presents end-
Annual Financial Report FY 2003 (Version 1.0) 1

of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements.

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

Assets: C urrent Assets C apital Assets, net Other Assets Total Assets

June 30, 2003
$15,235,860.88 55,821,328.92 1,876,989.84 72,934,179.64

June 30, 2002
$17,279,515.30 64,011,971.94 1,831,005.85 83,122,493.09

Liabilities: C urrent Liabilities Noncurrent Liabilities Total Liabilities

6,410,164.46 1,010,599.14 7,420,763.60

7,668,812.88 46,424.09
7,715,236.97

Net Assets: Invested in C apital Assets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects Unrestricted Total Net Assets

33,451,356.06
2,349,819.39
29,712,240.59 $65,513,416.04

63,899,773.43
2,050,103.19
9,457,379.50 $75,407,256.12

The total assets of the institution decreased by ($10,188,313.45). However, a review of the Statement of Net Assets will reveal that the decrease was primarily due to a decrease of ($8,190,643.02) of investment in plant, net of accumulated depreciation. The adjustment to assets was a result of the change to GASB reporting and an asset inventory completed in 2002. The GASB reporting change raised the capitalization threshold from $1,000 - $5,000. See Note 1 in the notes to the financial statements for additional information concerning the restatement of
Annual Financial Report FY 2003 (Version 1.0) 2

beginning net assets and the effect of this restatement on depreciable capital assets. Total current assets decreased during the year by ($2,043,654.42). The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution.

The total liabilities for the year decreased by ($294,473.37). The primary cause for the decrease was in other liabilities, primarily adjustments to capitalize lease payables as directed by the 2002 audit and GASB standards. The combination of the decrease in total assets of ($10,188,313.45) and the decrease in total liabilities of ($294,473.37) yields a decrease in total net assets of ($9,893,840.08).

Statement of Revenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

O perating Revenues O perating Expenses O perating Loss
Nonope rating R ev enues and Expenses
Incom e (Loss) B e fore other rev enues, expenses, gains or losses
O the r re ve nue s, ex pense s, gains or losses
Increase in Ne t A sse ts
Net A ssets at be ginning of y e ar, as originally reported C um ulativ e e ffe ct of change s in accounting principle Prior Year A djustm ents Net A ssets at be ginning of y e ar, restated
Net A ssets at End of Year

June 30, 2003 $58,873,013.13
99,979,086.79 (41,106,073.66)
41,142,224.72
36,151.06 733,367.32 769,518.38 75,407,256.12 (10,663,358.46) 64,743,897.66 $65,513,416.04

June 30, 2002 $54,642,956.46
92,611,703.47 (37,968,747.01)
46,118,411.16
8,149,664.15
8,149,664.15 131,196,179.50
63,938,587.53 67,257,591.97 $75,407,256.12

Annual Financial Report FY 2003 (Version 1.0) 3

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a decrease in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:
Revenue by Source For the Years Ended June 30, 2003 and June 30, 2002

Operating Revenue Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Auxiliary Other
Total Operating Revenue
Nonoperating Revenue State Appropriations Gifts Investment Income Grants and Contracts Other
Total Nonoperating Revenue
Capital Gifts and Grants State Capital Appropriations Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

June 30, 2003

June 30, 2002

$15,894,201.69 26,144,348.21 258,475.01 15,349,273.41 1,226,714.81
58,873,013.13

$15,432,746.85 23,628,161.71 288,620.78 14,545,353.17 748,073.95
54,642,956.46

39,986,413.00 14,000.00
300,991.05
843,687.20
41,145,091.25

43,377,244.00 558,921.14
2,182,246.02 46,118,411.16

161,197.90 572,169.42
733,367.32
$100,751,471.70

0.00 $100,761,367.62

Annual Financial Report FY 2003 (Version 1.0) 4

Expenses (By Functional Classification) For the Years Ended June 30, 2003 and June 30, 2002

Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student S ervices Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (C apital Assets)
Total Expenses

June 30, 2003
$33,000,229.42 922,605.36 176,203.62
9,820,240.78 4,468,874.19 7,685,936.11 8,283,586.30 18,542,333.21 13,384,178.04 3,694,899.76
99,979,086.79
2,866.53
$99,981,953.32

June 30, 2002
$31,492,558.14 844,939.75 174,423.85
9,546,258.45 4,273,011.05 8,455,572.69 7,724,827.96 17,764,018.96 12,336,092.62
92,611,703.47
$92,611,703.47

The compensation and employee benefits category increased by $2,710,187.33. The breakdown is as follows: faculty increase of $663,028.96, staff increase of $1,092,556.65 and benefits increase of $954,601.72. The increase reflects a pay raise for the employees of the institution of approximately three percent with the associated fringe benefits. The increase also reflects an increased cost of health insurance for the employees of the institution.
Utilities decreased by approximately ($129,442.70) during the past year. The decrease was caused by the University's efforts to aggressively attack utility costs through a number of cost saving initiatives.
Under non-operating revenues (expenses) state appropriations decreased by approximately ($3,390,831.00) as a result of 8.66% budget cuts at the state level.
Statement of Cash Flows
The final statement presented by the State University of West Georgia is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash
Annual Financial Report FY 2003 (Version 1.0) 5

used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.
Cash Flows for the Year Ended June 30, 2003, Condensed

Cash Provided (used) By: Operating Activities Non-capital Financing Activities Investing Activities Capital and Related Financing Activities
Net Change in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2003
($40,197,893.08) 41,160,063.90 300,991.05 (2,435,714.82)
(1,172,552.95) 15,195,976.07
$14,023,423.12

Capital Assets
The University did not have any capital asset additions for facilities in fiscal year 2003 from the Georgia State Finance and Investment Commission (GSFIC). On-going projects include the construction of Adamson Hall and the West Campus Electrical Distribution System. Future projects include the Health Wellness and Lifelong Learning Center, which rose one step on the Regents capital list to number 6. We anticipate construction funding in another year or two if the economy improves and the legislature allocates the funds.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Annual Financial Report FY 2003 (Version 1.0) 6

Economic Outlook The University continues to enjoy significant growth in student headcount. (Note that our student headcount increased by 645 students last year to 9,675 and we anticipate a fall enrollment in the 10,000 to 10,500 range.) The growth is generated by our increasingly successful marketing efforts as well as a significant increase in retention. All this growth comes at a time when budgets are being cut, which makes it increasingly difficult for us to maintain services at the level necessary to support the increasing numbers of students. The Governor has stated that we should plan for a 2.5% cut this year out of our base budget and a 5% cut going into the 2005 fiscal year. Since FY 2001, our state appropriation has declined by 11.16% while our enrollment has grown by 14 16% (Fall to Fall enrollment change). The overall financial position of the University is strong administratively. We continue to manage well even as resources are declining proportionate to the number of students available. Our attempts at managing efficiently can be seen in the drop in the Institutional Support category of about $800,000 from $8.5 million to $7.7 million from fiscal year 2002 to 2003. In addition, as mentioned earlier, we had a utility savings of $129,000, which shows the efforts we are making to attack costs and manage efficiently. As we go into fiscal year 2004 and look ahead to 2005, we anticipate continued strong growth in enrollments, a need to manage our resources as efficiently as possible, and continue our conservative approach to budget forecasting and management. _______________________ Dr. Beheruz N. Sethna, President State University of West Georgia
Annual Financial Report FY 2003 (Version 1.0) 7

Statement of Net Assets

S ta te U n iv e rs ity o f W e s t G e o rg ia

STA TEM ENT O F NET A SSETS

June 30, 2003

June 30, 2003

ASSETS

Curre nt A sse ts

C a s h a nd C a sh E q u iv a le n ts

$ 1 4 ,0 2 3 ,4 2 3 .1 2

S h o rt-te rm In v e s tm e n ts

A c co u n ts R e c e iv a b le , n e t

2 0 5 ,1 2 3 .1 2

Inv e n to rie s

6 7 7 ,6 5 2 .1 3

O th e r A ss e ts

3 2 9 ,6 6 2 .5 1

T o ta l C u rre n t A s se ts

1 5 ,2 3 5 ,8 6 0 .8 8

No ncurre nt A sse ts Noncurrent C ash Inv e s tm e n ts N o te s R e ce iv a b le , n e t C a p ita l A ss e ts, n e t T o ta l N o n c u rre n t A s se ts TOTAL ASSETS

1 ,8 7 6 ,9 8 9 .8 4 5 5 ,8 2 1 ,3 2 8 .9 2 5 7 ,6 9 8 ,3 1 8 .7 6 7 2 ,9 3 4 ,1 7 9 .6 4

LIA BILITIES Curre nt Lia b ilitie s
A c co u n ts P a y a b le a n d A cc ru e d Lia b ilitie s D e p o s its D efe rre d R ev e nue O th e r Lia b ilitie s D e p o s its H e ld fo r O th e r O rg a n iz a tio n s C o m p e n sa te d A b se n ce s (c u rre n t p o rtio n )
T o ta l C u rre n t Lia b ilitie s No ncurre nt Lia b ilitie s
C o m p e n sa te d A b se n ce s Lo n g -te rm Lia b ilitie s
T o ta l N o n c u rre n t Lia b ilitie s TOTA L LIA BILITIES

4 4 3 ,0 1 3 .0 5 2 5 7 ,3 7 5 .0 0 3 ,5 9 9 ,8 8 8 .5 1
7 9 ,5 6 4 .3 3 9 0 8 ,8 1 0 .5 3 1 ,1 2 1 ,5 1 3 .0 4 6 ,4 1 0 ,1 6 4 .4 6
9 7 7 ,1 3 0 .6 1 3 3 ,4 6 8 .5 3
1 ,0 1 0 ,5 9 9 .1 4 7 ,4 2 0 ,7 6 3 .6 0

NET ASSETS Inv e s te d in C a p ita l A s s e ts , n e t o f re la te d d e b t R e s tricte d fo r No ne x p e nd a b le Ex p e nd a b le C a p ita l P ro je cts U n re s tric te d TOTAL NET ASSETS

3 3 ,4 5 1 ,3 5 6 .0 6
2 ,3 4 9 ,8 1 9 .3 9 2 9 ,7 1 2 ,2 4 0 .5 9 $ 6 5 ,5 1 3 ,4 1 6 .0 4

Annual Financial Report FY 2003 (Version 1.0) 8

Statement of Revenues, Expenses and Changes in Net Assets

State University of West Georgia STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2003
June 30, 2003

REVENUES

Operating Revenues

Student Tuition and Fees

$20,700,340.47

Less: Sponsored and Unsponsored Scholarships

(4,806,138.78)

Federal Appropriations

Federal Grants and C ontracts

24,562,800.91

State and Local Grants and C ontracts

588,005.36

Nongovernmental Grants and C ontracts

993,541.94

Sales and Services of Educational Departments Auxiliary Enterprises Other Operating Revenues

258,475.01 15,349,273.41
1,226,714.81

Total Operating Revenues

58,873,013.13

EXPENSES

Operating Expenses

Salaries:

Faculty Staff

21,128,767.20 22,693,967.79

Benefits Other Personal Services

12,494,657.60

Travel Scholarships and Fellowships

970,128.20 19,213,747.35

Utilities

2,786,768.47

Supplies and Other Services Depreciation

18,786,940.50 1,904,109.68

Total Operating Expenses

99,979,086.79

Operating Income (loss) NONOPERATING REVENUES (EXPENSES)

(41,106,073.66)

State Appropriations

39,986,413.00

Gifts

14,000.00

Investment Income (endowments, auxiliary and other) Interest Expense (capital assets)

300,991.05 (2,866.53)

Other Nonoperating Revenues

843,687.20

Net Nonoperating Revenues

41,142,224.72

Income before other revenues, expenses, gains, or loss

36,151.06

State C apital Appropriations C apital Grants and Gifts Federal Grants & C ontracts State Grants & C ontracts

161,197.90 572,169.42

Other Grants and C ontracts

Total Other Revenues

733,367.32

Increase in Net Assets NET ASSETS

769,518.38

Net Assets-beginning of year, as originally reported

75,407,256.12

C umulative effect of changes in accounting principle

Prior Year Adjustments

(10,663,358.46)

Net Assets-beginning of year, restated

64,743,897.66

Net Assets-End of Year

$65,513,416.04

Annual Financial Report FY 2003 (Version 1.0) 9

Statement of Cash Flows
State University of West Georgia STATEMENT OF CASH FLOWS
For the Year Ended June 30, 2003
CASH F LOWS F ROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k ing /T r a ns p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities
CASH F LOWS F ROM NON-CAPITAL F INANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities
CASH F LOWS F ROM CAPITAL AND RELATED F INANCING ACTIVITIES C apital Grants and Gifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital Debt and Leases Interest Paid on C apital Debt and Leases Net C ash used by C apital and Related Financing Activities
CASH F LOWS F ROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year

June 30, 2003
$16,433,903.08
8,933,019.95 349,444.09
(36,741,423.08) (43,670,588.29)
(1,871,895.35) (543,905.50) 497,921.51
5,234,281.17 3,056,181.96 2,801,987.22
520,866.52 1,187,102.56 1,972,369.61
292,840.55 1,350,000.92 (40,197,893.08)
39,986,413.00 325,963.70 847,687.20
41,160,063.90
743,367.32
(3,166,126.58) (10,089.03) (2,866.53)
(2,435,714.82)
300,991.05
300,991.05 (1,172,552.95) 15,195,976.07 $14,023,423.12

Annual Financial Report FY 2003 (Version 1.0) 10

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating Activities
D e pr e c ia tio n C hange in Assets and Liabilities:
Receivables, net I nv e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences
Net C ash Provided (used) by Operating Activities

($41,106,073.66)
1,904,109.68
760,319.03 (60,634.61) (1,617,433.82) (38,723.55) (280,954.75) 136,659.72 104,838.88
($40,197,893.08)

REC ONC ILIATION OF C ASH AND C ASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS

C ash and C ash Equivalents C lassified as C urrent Assets C ash and C ash Equivalents C lassified as Non-current Assets

$14,023,423.12 0.00
$14,023,423.12

State University of West Georgia had no transactions to report under Non-Cash Investing, NonCapital Financing, and Capital and Related-Financing Transactions.

Annual Financial Report FY 2003 (Version 1.0) 11

STATE UNIVERSITY OF WEST GEORGIA NOTES TO THE FINANCIAL STATEMENTS
June 30, 2003
Note 1. Summary of Significant Accounting Policies
Nature of Operations State University of West Georgia serves the state, and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity State University of West Georgia is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of State University of West Georgia as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. State University of West Georgia does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, State University of West Georgia is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of
Annual Financial Report FY 2003 (Version 1.0) 12

materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
Basis of Accounting For financial reporting purposes, the University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-university transactions have been eliminated.
The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments.
Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Consumable supplies are carried at the lower of cost or market on either the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis.
Annual Financial Report FY 2003 (Version 1.0) 13

Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment.
During fiscal year 2003, the University System of Georgia recalculated accumulated depreciation to include a 10% residual value on all capital assets except equipment. This change is reported as a prior year adjustment on the Statement of Revenues, Expenses, and Changes in Net Assets. The effect of this change is a decrease to accumulated depreciation and an increase to capital assets.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to State University of West Georgia when complete. For the year ended June 30, 2003, GSFIC transferred no capital additions to the State University of West Georgia.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net
Annual Financial Report FY 2003 (Version 1.0) 14

Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. State University of West Georgia had accrued liability for compensated absences in the amount of $2,146,330.83 as of 7-1-2002 ($1,993,804.77 + $152,526.06 for FICA adjustments). For FY2003, $1,576,010.55 was earned in compensated absences and employees were paid $1,623,697.73, for a net decrease of $47,687.18. The ending balance as of 6-30-2003 in accrued liability for compensated absences is $2,098,643.65.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The University's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the office of Treasury and
Annual Financial Report FY 2003 (Version 1.0) 15

Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted Total Unrestricted Net Assets

June 30, 2003
$1,882,325.63 2,068,700.77 639,949.11
25,121,265.08 $29,712,240.59

When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes State University of West Georgia, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues The University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees

Annual Financial Report FY 2003 (Version 1.0) 16

and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships.
Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
State of Georgia Collateralization Statutes and Policies
Funds belonging to the State of Georgia (and thus State University of West Georgia) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus State University of West Georgia), the option of exempting demand deposits from the collateral requirements.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
Annual Financial Report FY 2003 (Version 1.0) 17

Categorization of Deposits
The University's cash deposits are categorized by risk as follows:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the University or by its agent in the University's name.
Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University's name.
Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the University's name, and amounts uncollateralized.
Cash Deposits as of June 30, 2003

C ash Deposits Investment Portfolio Accounts
Total C ash Deposits

C arrying Amount
$2,051,037.01

Bank Balances
$3,518,625.93

Risk C ategories

1

2

3

$301,631.81 $3,216,994.12 $0.00

$2,051,037.01 $3,518,625.93 $301,631.81 $3,216,994.12 $0.00

Categorization of Investments
The University's investments are categorized as to credit risk within the three categories described below:
Category 1 - Insured or registered, or securities held by the University or its agent in the University's name
Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name.
Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University's name.

Annual Financial Report FY 2003 (Version 1.0) 18

At June 30, 2003, the University's investments consisted of the following:

Type of Investments
C ommon Stock C orporate Bonds Securities and C orporate O b lig a tio ns

Risk C ategories

1

2

$0.00

$0.00

0.00

0.00

3 $0.00

C arrying Amount
$0.00
0.00

Totals

$0.00

$0.00

$0.00

$0.00

Investments Not Subject to C ategorizations: Board of Regents
Short-Term Fund Balanced Income Fund Total Return Fund Investment Portfolio Accounts Mutual Funds Real Estate State Investment Pool Short-Term Investments
Total Investments

1,818,427.67
10,314,551.85 $12,132,979.52

Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool.

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2003.

S tudent Tuition and Fees A uxiliary Enterprises and Other Operating A ctivities Fede ral, S tate , and Private Funds O the r
Less A llowance for D oubtful A ccounts
Net A ccounts Receivable

June 30, 2003
$195,828.96 7,805.74
(80,768.46) 82,256.88 205,123.12
$205,123.12

Annual Financial Report FY 2003 (Version 1.0) 19

Note 4. Inventories

Inventories consisted of the following at June 30, 2003.

June 30, 2003

B o o k sto re C e ntra l W a re ho use C e ntre S ho p p e
T o ta l

$ 5 3 9 ,8 6 1 .7 2 1 3 7 ,7 9 0 .4 1
$ 6 7 7 ,6 5 2 .1 3

Note 5. Notes/Loans Receivable
Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2003 and 2002. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The University has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2003 the allowance for uncollectible loans was zero.

Annual Financial Report FY 2003 (Version 1.0) 20

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2003.

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2002
$554,184.25 719,863.22
1,274,047.47

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

1,120,050.60 77,558,614.24
1,227,973.00 11,936,969.70
672,356.35 11,648,011.05
58,023.00 104,221,997.94

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

33,668,054.78 538,559.27
5,921,260.32 1,043,482.78 8,783,880.27
13,697.88 49,968,935.30

Total Capital Assets, Being Depreciated, Net 54,253,062.64

Capital Assets, net

$55,527,110.11

Additions
$0.00 1,874,797.49 1,874,797.49

Reductions
$0.00 2,014,980.22 2,014,980.22

Ending Balance 6/30/2003
$554,184.25 579,680.49
1,133,864.74

19,273,450.36 148,830.34
3,524,744.20 106,915.94 848,087.15
23,902,027.99

1,120,050.60 16,885,008.00
4,265,955.76 672,356.35 71,082.56 9,407.00
23,023,860.27

0.00 79,947,056.60
1,376,803.34 11,195,758.14
106,915.94 12,425,015.64
48,616.00 105,100,165.66

25,748.29 13,963,147.28
70,763.75 3,665,989.35
155,489.95 550,379.00
1,468.86 18,432,986.48
5,469,041.51
$7,343,839.00

14,976,133.99 60,931.93
1,820,431.36 1,059,879.76
71,082.56 760.70
17,989,220.30
5,034,639.97
$7,049,620.19

25,748.29 32,655,068.07
548,391.09 7,766,818.31
139,092.97 9,263,176.71
14,406.04 50,412,701.48
54,687,464.18
$55,821,328.92

Annual Financial Report FY 2003 (Version 1.0) 21

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2003.

P re pa id Tuition a nd Fe e s Research O the r D e fe rre d R e v e nue
T o ta ls

June 30, 2003 $2,826,636.92
773,251.59 $3,599,888.51

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2003 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2002
$46,424.09

Additions $33,468.53

Reductions

Ending Balance June 30, 2003

$46,424.09

$33,468.53

Current Portion
$0.00

Other Liabilities Compensated Absences (a) Other Long Term Liabilities Total

1,993,804.77 1,728,536.61 1,993,804.77 1,728,536.61

1,623,697.73 1,623,697.73

2,098,643.65 0.00
2,098,643.65

1,121,513.04 1,121,513.04

Total Long Term Obligations

$2,040,228.86 $1,762,005.14 $1,670,121.82 $2,132,112.18 $1,121,513.04

(a) The beginning balance includes the amount shown as current in FY2002 and reclassified as long-term in FY2003.

Note 9. Lease Obligations
State University of West Georgia had a total of 82 operating leases and 4 real estate leases for fiscal year 2003. The operating leases provide for renewal options from one to four years beyond their original date of issuance. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and mailing systems. The real estate leases consist of two buildings, a rental fee for the use of a stadium and apartment rental for use by our athletic team.
Operating lease expenditures in 2003 were $222,897.47. Real estate lease expenditures in 2003 were $134,396.04.

Annual Financial Report FY 2003 (Version 1.0) 22

Future commitments for capital leases are as follows:

Year Ending June 30:

Year

2004

1

2005

2

2006

3

2007

4

2008

5

2009through 2013

6-10

2014 through 2018

11-15

2019 through 2023

16-20

2024 through 2028

21-25

2029 through 2033

26-30

2034 through 2038

31-35

2039 through 2043

36-40

Total m inim um lease paym ents

Less: Interest

Less: Executory costs (if paid)

Principal O utstanding

Real Property

C apital Lease s

Operating Leases

$12,955.56 12,955.56 7,557.41

$167,586.62 143,390.59 110,730.06 31,778.16 9,333.15 0.00

33,469
0.00 $33,468.53

$462,818.58

Annual Financial Report FY 2003 (Version 1.0) 23

Note 10. Retirement Plans

Teachers Retirement System Of Georgia

Plan Description State University of West Georgia participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy Employees of State University of West Georgia who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. State University of West Georgia makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$2,191,615.93 $2,129,640.40 $2,813,817.96

Regents Retirement Plan

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.

Funding Policy State University of West Georgia makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statue and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's earnable compensation.

Annual Financial Report FY 2003 (Version 1.0) 24

Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.
State University of West Georgia and the covered employees made the required contributions of $1,613,811.32 (10.02%) and $805,279.43 (5%), respectively.
Georgia Defined Contribution Plan
Plan Description State University of West Georgia participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $63,191.23 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Note 11. Risk Management
State University of West Georgia is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. State University of West Georgia and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per
Annual Financial Report FY 2003 (Version 1.0) 25

person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. State University of West Georgia, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 12. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although State University of West Georgia expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against State University of West Georgia (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
Note 13. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the
Annual Financial Report FY 2003 (Version 1.0) 26

group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2003, there were 360 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, State University of West Georgia recognized as incurred $1,192,507.40 of expenditures, which was net of $392,060.57 of participant contributions.
Annual Financial Report FY 2003 (Version 1.0) 27

Note 14. Natural Classifications With Functional Classifications The University's operating expenses by functional classification for FY2003 are shown below:

St at ement of Operat ing Expenses - Nat ural vs F unc t ional Classific at ions F or t he F isc al Y ear Ended June 30, 2003
F unc t ional Classific at ion FY 2003

Natural C la ssification

I n s tr u c tio n

Research

P u b lic S ervice

A cadem ic Support

S tude nt S erv ices

F aculty Staff B enefits P erso nal Services T ravel Scho larships and F ello wships Ut ilit ie s Supplies and Others Services D epreciatio n

$ 20,649,563.96 4 ,0 2 6 ,5 3 6 .0 2 5 ,7 2 3 ,9 8 3 .7 8
3 9 3 ,8 7 5 .2 3 18 ,9 9 2 .0 0 226,112.82
1,958,459.12 2 ,7 0 6 .4 9

$ 120,102.92 2 2 4 ,3 5 1.3 8 61,699.71
3 7 ,3 8 5 .8 6 3 ,0 0 1.5 0 1,2 7 9 .6 7
3 9 9 ,8 14 .6 4 7 4 ,9 6 9 .6 8

$ 0.00 12 4 ,2 0 3 .7 9
31,402.07
3 ,3 5 7 .3 4
1,530.12 15,710.30

$ 328,866.32 5 ,3 4 5 ,2 7 1.19 1,4 0 2 ,4 4 3 .4 3
112 ,3 6 8 .4 2
7 0 ,9 9 4 .0 6 3 ,17 8 ,6 0 9 .2 6
(618,311.90)

$ 17,684.00 2,760,255.25
683,697.46
151,646.01 5 ,10 0 .0 0
54,335.65 7 9 6 ,17 7 .7 9
(21.97)

T o tal Expens es

$ 33,000,229.42

$ 922,605.36

$ 176,203.62

$ 9,820,240.78

$ 4,468,874.19

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003

Natural Classification

Inst it utio nal Suppo rt

P lant Operatio ns & M aintenance

Functional Classification FY2003

Scho larships & Fellowships

A uxiliary Enterprises

Unallo cat ed Expenses

To tal Expenses

Faculty Staff B enefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciatio n

$ 50.00 3,949,747.55 2,885,715.50
42,151.21

$ 0.00 3,862,491.21 1,197,377.64 (2,074,546.01)
11,050.23

52,080.44 1,251,592.75 (495,401.34)

1,947,216.17 3,310,417.23
29,579.83

$ 0.00 18,542,333.21

$ 12,500.00 2,401,111.40 508,338.01 2,074,546.01 218,293.90 644,320.64 433,219.54 7,834,052.60 (742,204.06)

$ 0.00
42,106.81 3,652,792.95

$ 21,128,767.20 22,693,967.79 12,494,657.60
0.00 970,128.20 19,213,747.35 2,786,768.47 18,786,940.50 1,904,109.68

Total Expenses

$ 7,685,936.11

$ 8,283,586.30

$ 18,542,333.21

$ 13,384,178.04

$ 3,694,899.76

$ 99,979,086.79

Annual Financial Report FY 2003 (Version 1.0) 28